The truth about startups, smart phones, and hospitality with Carl Schramm


The truth about startups, smart phones, and hospitality with Carl Schramm

We speak to the start-up guru The Economist magazine calls “the evangelist of entrepreneurship” about his new book Burn the Business Plan: What Great Entrepreneurs Really Do.






Carl Schramm is a celebrated American economist and successful entrepreneur in his own right. As a civic innovator, he’s taught at Baltimore’s venerable Johns Hopkins University and headed up The Kauffman Foundation, a highly influential non-profit organisation driving social improvement by cultivating entrepreneurship. In testament to his foresight as a founder, he set up a data-crunching healthcare initiative as far back as 1980. He’s also served as president of service giant America’s Health Insurance Plans, and an executive VP of Fortis. Plus as a commentator, he’s a regular contributor to The Wall Street Journal. He currently teaches at Syracuse University.

Schramm believes that small business ventures are a vital force for good, disrupting dysfunctional institutions and bringing communities together. He is outspoken, though, about the many myths of entrepreneurship. It is middle-aged people with corporate employment histories, he points out, who make for the most successful entrepreneurs. “The truth is that the average entrepreneur is nearly 40 years old,” says Schramm.
Larger companies have the budgets that allow imaginative workers to innovate and disrupt from within, priming them for future entrepreneurship, claims Schramm. At the same time, these workers are learning transferable skills such as negotiation, adaptability and how to scale a business. Working in the blue-chip sector is an excellent way to gain skills while honing one’s own ideas. Skills like negotiation, management and, most of all, adaptability.

It’s this last point in particular that’s central to Schramm’s new book, Burn the Business Plan: What Great Entrepreneurs Really Do. Therein he points out that Facebook, Apple and Google never even had a business plan, and that most pre-prepared strategies will never survive the reality of commerce. Fluidity, Dr Schramm claims, is paramount to success. Schramm spoke in person at London’s How to Academy, and Glion was fortunate enough to be granted a private audience after the seminar. Here’s what we spoke about; readers with an aversion to straight talking should scroll past now.

Glion: Dr Schramm, thanks for addressing some questions for Glion students and staff today. Much of your own work has centred on improving healthcare facilities. But how do you think the hospitality sector could be refined?

Carl J Schramm: “I’m a real hotel customer. When everything runs smoothly, you don’t even think about how it could be improved. But mostly hotels don’t run smoothly enough. They haven’t ironed out the variants. It’s a human capital management problem… as it is every single time.

I usually stay at the Park Hyatt, and they have a generally consistent, great product. I almost never have a problem. Now, I just went to a very fancy hotel in Amsterdam for three days. I guarantee my assistant I’ll get off the plane at 7.00am. I check-in and I’m told they don’t have a room till three. I tell them it’s unacceptable. So they put me in a room without a window. At 8.30am. And I took it.

The market value is in solving my problem, rather than a gorgeous face to look at. I’m checking in. I want to get to my room. Don’t give me any trouble about the internet, and I really hope the air conditioning works. Give me a flat sheet because I hate duvets. And if you can do all that, I’m happy.

These gorgeous young people, they take you upstairs and the air conditioning doesn’t work, they don’t know anything about the wi-fi, and you have to explain to them what a flat sheet is. No. Give me the product.”

Thanks for that insight. Sommet Education CEO Benoît-Etienne Domenget, has this to add on the important matter of hotel trade evolution:

“The hospitality, service and retail industries still have something unique to offer and to cultivate – direct contact with clients. Service, attention to detail, the human touch… these are the elements that can elevate the guest experience. Our human talent is what makes the difference.
Whether we’re talking about a five-star hotel chain or an independent boutique, content management and the delivery of meaningful experiences are key to success. Luxury is experiential. Of course, the product is fundamental — the physical hotel, the restaurant, the ingredients — but experiences are how customers make memorable, emotional connections.

The shift towards an experience-driven market has given rise to new creative roles requiring emotional intelligence and the ability to anticipate customer needs. In this regard, hospitality graduates are in a privileged position, as they have often honed the skills that employers seek.

In order to succeed in the luxury industry, developing human talent is essential. The importance of soft skills is one of the reasons why luxury brands often approach hotel schools, as hospitality students are well versed in building excellent customer relations. Paired with business acumen, it’s the soft skills, such as communication, problem-solving, empathy and cultural understanding, that can really make the difference in providing luxury guest experiences.”

Dr Schramm, do you have any other recommendations for hoteliers?

“Where I live in upstate New York we have a grocery chain called Wegmans. Fantastic supermarkets. They’re just like Home Depot. If you ask them where something is they reply, “Come with me.” What Wegmans do is grocery shopping as entertainment. It’s a pleasing experience. That’s what hotels need to apply to their service cultures.”

In your new book you unravel the cliché of the contemporary entrepreneur. One myth you tackle is age. You write that your data insists people around age 40, with resumés marked by time at major companies, make for more successful entrepreneurs than 20-somethings fresh out of business school. Starting a business is notoriously draining – and the forty-something former executives you talk about often complain about not having the energy they used to once they hit middle age. What’s your take on that?

“If I was an investor, how could you possibly tell me that you didn’t have the energy you used to? I obviously wouldn’t invest.

These people should ask themselves, does their business excite them well enough that they’re even conscious of being tired? There may be things they’re doing on the side that are sapping too much energy. You should take enormous amounts of energy out of your ideas.

I just came from a board meeting in Amsterdam where a 70 year-old guy told me he’d never felt more energetic in his life. The evidence continues to grow that people become more creative as they’re older.

So this whole myth, that you have your brilliant year at 21… We’re ripping that thing apart. My belief is innovation is synthetic. A guy says he had his brilliant idea at the breakfast table – what he actually means is overnight his subconscious combined things he’d learned, and saw them a different way.

These ideas are a combination of things, not ‘data’ or anything completely new. Look at Uber. There’s no new technology there. It was invented by two guys trying to get a taxi cab in a rainstorm in Paris. The rolling stock was there, they knew about the apps, geo-positioning had been around for twenty years. It, and the insight, were remarkably simple. Facebook was invented because Mark Zuckerberg wanted to know where the pretty girls were. That’s as simple as it gets.”

Will tech giants like Facebook survive the regulation coming their way?
“Of course they’ll be able to cope! That’s how politics work. These companies are huge, and rich. The legislation will be made to benefit them. I’m an economist; I know regulation keeps out competitors. Did you hear Mark Zuckerberg say “I can’t wait to be regulated”? It’s essentially what he said.
I log on in Europe three days ago, and I get all this stuff from Google about conforming to EU regulations and ‘privacy, privacy, privacy…’ Firstly, I don’t believe it for a minute. Secondly, they’ll say to the EU, “Listen, we’ve invested in all this, you can’t let people who don’t know this business in. We’re the search agency of Europe, and we comply, and you’ll protect us right?

The EU will say, “Of course, we exist to protect big companies. We came from the Keynesian idea that big companies are better than these impudent start ups.” The entire French economy is built on industrial plans that are government plans, as is the German. I presume people can read my email and my search history. I’m careful, that’s all. Sometimes I call people [gestures with his mobile phone]… can you imagine it?”

Do you believe that the smartphone is a force for good or bad, as far as entrepreneurs are concerned?
“It depends on discipline, and the individual’s use of it. I think for most people, yes, it does sap time away from the creativity going on inside their heads. It’s not just a time management issue, it’s a mind management issue. These things are horrible in that regard – ‘a total distraction’ as the nuns in my catholic school would have said. The life you want to lead is in your head. On balance, they’re net positive. But for most people they’re a total drain of time.

The biggest philosophical issue with smart phones is that they’re eroding individualisation, and eroding human consciousness. ‘Who am I? Let me find out who my cohort group think they are. And then I’ll think like they do, and they’ll like me and I won’t feel like an outrider’. I don’t know… I was born to be a contrarian.”

Burn the Business Plan: What Great Entrepreneurs Really Do is out now from Simon & Schuster. Thanks to the How to Academy.

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