Sramana Mitra’s recent Forbes.com article laments the overemphasis of fundraising and underemphasis of “bootstrapping” in business school entrepreneurship classes. Students learn the ins and outs of attracting venture capital to their idea, Mitra argues, but precious little about how to actually get that idea off the ground from an operational perspective. As a result, the argument continues, students are left with unrealistic expectations and the promise of little more than failure.
The main problem, of course, is that entrepreneurs (and their teachers) skim over vital lessons on business crawling and walking in favor of much sexier teachings of wowing venture capitalists and customers assumed to already be lined up to buy their idea. Their minds are focused on the creation of multi-million dollar firms instead of the creation of something small, but powerful, that can someday be brought to scale.
We frequently witness similar phenomena in credit unions. New ideas that can create incremental improvements in operations, marketing, collections, and member service are frequently dismissed because they, by themselves, fail to solve all of a credit union’s problems. We reject ideas that will require good, old-fashioned bootstrapping in an indefinite holdout for a world-beating innovation to knock down our door, requiring little more than a meeting and a signed check.
The truth is, most big ideas start as small ideas that someone, somewhere believed in so much that she dedicated an amazing amount of time and effort bringing them to the marketplace. Bootstrapping could very well be the most important competency in credit union innovation.
Ideas mean nothing if they don’t come to life.
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Well said, Matt. However, the problem is attracting a 19-year-old to a class entitled Creating a Business Plan versus Get Fast Cash for Your Ideas.
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@Sarah Thanks for the comment! You’re exactly right. It’s why they make Accounting 101 a prerequisite to more exciting classes…if it were an elective, almost no one would take it.
For every two analyst positions a credit union has, I propose they create a position called “bootstrapper.” What good is data (or ideas) if there isn’t someone to make it happen, or put it to practical use? Please tell me it isn’t simply so credit unions have something to talk about at their staff meetings.
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Nice post Matt and I’d agree that bootstrapping for many types of innovations make sense and lends itself to a more focused product because of it but, I’d also like to offer another perspective.
No two innovations are alike in both complexity and resources and there is a significant difference between incremental innovations and breakthrough innovations. For example, Arkadi Kuhlmann (CEO and founder of ING direct) required $500M dollars in capital to get his idea off the ground and his success speaks for itself.
But back to your point, this is the beauty of the innovation landscape. Some people choose to be less risky and incrementally innovate a process, a product, or a culture and others have the risk tolerance to only get one fastball and see if they can knock it out of the park. Both types of innovations are extremely important but depending on your scope, bootstrapping would only go so far.
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@Brad Thank you for your comment. As an entrepreneur yourself, you know first hand the challenges (and rewards) innovations present. Kuhlmann’s successful launch of ING Direct is an excellent example of the magic that happens when funding and good, old-fashioned bootstrapping come together. Kuhlmann is a visionary in terms of organizational behavior, branding, IT, and building a focused team towards a specific goal. Would his dream have come true without the seed capital and backing of ING Bank? Almost definitely no. Would the program have a snowball’s chance in Ecuador for success without Kuhlmann’s boots on the ground and implementation savvy? Not a chance.
No one’s saying don’t dream big (I couldn’t be a bigger dreamer if I tried). The point is simply that big dreams are realized through down and dirty bootstrapping. Whatever your budget or ability to woo VC, implementation is where the magic happens.
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Thx for the post Matt. I understand the idea of bootstrapping very well and got things started by getting a couple hundred bucks from pawning off my band equipment (little known story… I was in a punk rock band and had liberty spikes), quitting my job waiting tables, getting a DBA same day and busting my tail.
There is still so much work to be done and feel like we are just scratching the surface 8 years later. Something that helps and is so important to keep going through the valleys is that we love what we do and do what we love.
From my experience, bootstrapping forces innovation. You have a limited amount of resources to work with and must do the best with what you have. It’s all about sweat equity. Blood, sweat and tears. Believing so strongly in something and bleeding passion.
We work hard to use and live by the three CU GROW principles of innovation, communication and collaboration. There are no dumb ideas or wrong answers. Everyone brings something special to the table.
After working with many different credit unions, all have very different cultures. Some progressive, some conservative, some built on a culture of fear.
I hope to see credit unions pick up, embrace and grow a culture of innovation. It’s possible and great things can come from it.
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@James Robert Thank you for bringing the world of punk rock to credit unions. A little bit of Johhny Rotten could do us some good! :)
In all seriousness your point about “bleeding passion” is well made. If you don’t believe in your idea, who will?
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Great post, Matt. We see a version of this when we talk to credit unions about going paperless. We often start out with a specific project that could immediately have a big impact on cost savings and efficiency but is defined enough to implement quickly – but then a bigger group get involved and piles on so many additional requirements (trying to solve every issue at once) that the whole thing bogs down.
We call it “going supernova” and it happens way more often than we had expected.
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