P&Q: Social innovation and social entrepreneurship are increasingly popular with MBAs. Share with us some of the course offerings and activities that Anderson provides in these areas?
AO: We have given visibility to a number of social entrepreneurship programs in the Price Center. In the U.S. and Africa, we’ve done work with community health clinics. We also work with Head Start. We have a decided approach in how you build and grow these institutions, which I think is different and has been attractive to students as a result.
I’ve mentioned the consultative aspect of students working with these organizations. For over 25 years, we’ve been able to refine a model of how social ventures should be conducted. That’s a long conversation, but the key idea here is understanding entrepreneurship as an efficient driver for social enterprise that can take ideas and have impact. These days, our students want to have impact sooner rather than later. Now, we’re working with the government, the Department of Health and Human Services, that has funded some innovative work in our Health Care Institute where we’ve reached over 100,000 families and helped them do a better job of managing their health resources. All of that has made it attractive for socially-minded students to be here.
There is a center that we just started called Impact@Anderson where we work with Net Impact and those kinds of organizations. We have a focus on other issues working across campus on areas like sustainability, the environment, and so on. We’re interdisciplinary at UCLA, so students concerned with education, the environment, and providing services to the underserved around the globe can be part of international immersion programs that address these issues. Some of that involves projects that have meaningful social impact. Imagine studying the delivery of rural health in Ghana and trying to find effective ways to work with clients. This really becomes a class project for a whole team of students.
One of our efforts in social innovation is to have classwork that is specifically geared to understanding impact. We have a course in social entrepreneurship; another that deals with nonprofit management; and another on the legal aspects of all of that. As I mentioned before, we have an applied management research focus that brings it all together. My hypothesis is that the fundamental principles of entrepreneurship are applicable whether you’re looking to build a business or have impact on society.
For over 25 years, we’ve worked with Johnson & Johnson in bringing a managerial and entrepreneurial competence to leaders and managers of Head Start, which touches a million kids every day. It is the last of the Great Society programs. We have been able to let those running those agencies — wonderful people who are social workers, nurses, and school teachers — who know about the early development of children but maybe not managerial principles. So we complement that knowledge by teaching them to think strategically by inviting 40 or so Head Start directors for a two-week program every summer. These are people who are basically running small businesses. Head Start is a $9 billion dollar industry funded by grants from the Federal, state, and local government (and private foundations). So we have provided a program where, if you apply, you have to agree that you’re going to do something different that helps your growth aspirations or changes the fortune of your enterprise or the people that you serve. I call it a Management Improvement Project.
We apply the same idea to health care agencies where they come in for two weeks. For example, we have CHIP (Community Health Improvement Project). Here, the students build an effort where they follow up and support clients once they get back for implementation. We have awards for the best project. J&J also supports our Health Care Institute which is designed to understand the health literacy concerns of poor families. We’ve had impact on their lives by allowing them to feel empowered by addressing the healthcare needs of their children. We believe parents are the most important variable of furthering the education and aspirations of their children. We have made a bet to train 100,000 families to do just that.
P&Q: You founded the Price Center in 1987. Looking back over the past 30 years, how have you seen both the study and the practice of entrepreneurship evolve? What trends do you see emerging and how will they impact MBA students?
AO: I’ve been around academia for 50 years. At UCLA, I saw an unmet need and set out to fill it. I started what I call a Venture Fellows Program. Over the years, we’ve placed our MBA students in venture-backed business development companies migrating over the years to private equity even to being entrepreneurially-backed firms to give students that experience. I thought that was missing from the UCLA curriculum. When I got back from Washington, I started the Fellows Program which eventually led to starting and capitalizing the Price Center for Entrepreneurship and Innovation.
Entrepreneurship over the years has struggled with the ability to find a home in the research-driven enterprise, where entrepreneurship was thought only to be learned through active learning.
I think that we’ve come full circle by being able to add a science of frameworks, theories, and approaches. I started the Price Center when I came back from Washington DC. I was a fellow at Brookings and then spent some time at the Securities and Exchange Commission. There, I would meet venture capitalists who were complaining about something called Rule 144. If you go back, you’ll find that it was very burdensome because it affected the way in which early investors gained liquidity. I did a couple of studies at the Commission and affected a change in the rule. I was at the Commission when Microsoft went public. So the practice has become important. People have understood its value.
I think that the fundamentals are unchanged. What is new are things like minimum viable product, business model canvas, all of which have tried to provide, let me just call it, a new framework or packaging for some core ideas. Starting a business is not rocket science, but if you can improve your prospects of being successful through certain hypotheses, like being able to do primary research and then being able to manage on a minimum viable basis, the initial effort makes it a little more attractive and scientific to students. I value that. That’s fundamental change.
Research on the acceleration of ideas that are researched and turned into development projects to be commercialized has seemed to all come together in what we call lean startup. The fundamentals remain the same. You need to talk to customers. You need to understand what the need is — what the pain is — if you’re going to come up with a viable solution. So there is iteration between what the product or service might do relative to what the need might be. Therefore, you try to see if there is a viable market. Can it be penetrated in a reasonable length of time? Then, there are the usual things about marketing and operations, manufacturing, managing people, talent development, and so on. All of that in a strategic framework are fundamental. However, the risks are great. The notion of learning quickly and failing (if necessary) quickly are net positives.
What has happened? Well, the democratization of finance has been a critical, external factor. Crowdfunding is an example. The cost of starting a business because of IT and technologies has literally become nothing. This is why we have had enormous companies started by people just sitting there in their dorm room being able to access the internet and coming up with ways of improving delivery of services or products to one group or another. What’s happened? Well, there’s new life as a result of science and their ability to do testing that’s cost effective about our hypotheses. The cost of starting a business is going so low that people can sit in their living rooms and literally disrupt a well-established Fortune 100 company. The world is turbulent. There is a lot of disruption. And I think you can take advantage of that if you are savvy and smart and bring about market share advantages. Just look at the Dollar Shave Club. Here is a company with an idea barely three years ago at an incubator called Science here in Southern California. They made Gilette change its whole approach to dealing with things.