Interview with Dr. Karla Callahan: Traditional education does not come close to predicting startup success

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Filip Orth
Student at Santa Clara University, Freelancer
Bratislava, Slovakia

Dr. Karla Callahan is a founder and CEO of a medical device startup company, Vizyontech, while also teaching at Santa Clara University as Dean’s Executive Professor in information systems and analytics. Dr. Callahan is the inventor and author of an issued U.S. patent for Vizyontech’s 3D ultrasound system architecture. She received the Distinguished Alumni Award from her alma mater, South Dakota School of Mines and Technology, for her career achievements, community contributions and patented invention in 2015.

Dr. Callahan’s career experience in high technology encompasses the medical device, semiconductor and computer industries. She has held engineering and business executive positions in successful startup companies and in large multinational corporations. Her resume includes Texas Instruments, Cypress Semiconductor, and American Microsystems. She has managed and grown multi-million dollar businesses with thousands of employees in multiple countries. Prior to Vizyontech, Dr. Callahan was the CEO of United Silicon Structures (US2), a semi-custom integrated circuit (ASIC) startup company that used e-beam direct-write-on-silicon wafers for rapid prototyping. After successfully integrating the flight safety protocols for Boeing’s 777 into a silicon chip, she sold US2 to a European company.

Dr. Callahan was recognized in 2015 by Tau Beta Pi Association, the Engineering Honor Society, and awarded Eminent Engineer status in recognition of her professional accomplishment in technology, exemplary character and the commitment to professional integrity. Dr. Callahan has contributed to SCU’s Fulbright Scholar Italian cohort program’s entrepreneurship; has been a guest speaker at Stanford University, the National University of Singapore, three universities in Istanbul, Turkey (Sabanci, Koҫ, and Erciyes), and at SCU’s Global Social Benefit Incubator. She enjoys mentoring and teaching students for careers in business, engineering, science, or technology and is active in the STEM program through Expanding Your Horizons for students in 7-8th grade.

 

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You are a very successful business person, participating in many technological projects at large corporations and startups, yet you decided to teach at university. What has led you to this?

Dr. Callahan: Speaking generally, there are three reasons that draw me to the university environment and teaching students. First, it is an important place where innovation thrives. Second, there is a synergy between my experience and the universities’ students and incubator programs which continue to accelerate globally. The share of incubator programs associated with universities has grown to a record high of 42%, according to the International Business Innovation Association’s 2016 IMPACT Index. Third, I have been fortunate and successful, so it is quite satisfying to assist others to reach their goals. From a business perspective, it also serves to help find new employees, test ideas and keep market data up-to-the-minute. In startups and in large companies, it is critical to have the flame of new ideas fed by the fuel of experience. This accomplishes staying innovative and achieving success, while burning up much less time and money.

My growing-up years were in a family where we always ‘wondered why’. We then proceeded to ‘find out’, which led to some very interesting building, experimenting, taking things apart, reading and questioning. This led to my career in engineering, design and manufacturing. As you can see by my background, I have worked at large corporations and four startup companies, always with focus on new product design and implementation. This means lots of problem solving. Creating something new, solving problems and growing a company quickly requires a lot of critical thinking.

Since I have hired and managed literally thousands of people over 22 countries in my career, I can say that I have spent a lot of time and resources focused on either hiring or training people to think critically. Like any skill, being excellent requires practice. I firmly believe critical thinking needs to start earlier at universities. Gartner, one of the world’s leading information technology research and advisory companies, recently asked hundreds of companies about the capabilities of recently hired graduates and which of these skills were most desired and which were missing. Critical thinking was the top ‘desired, but missing’ skill noted. Consequently, I decided to influence this change and be part of the solution as a professor at Santa Clara University.

 

What do you think predicts if a startup survives and becomes successful? How do you see it? How do you characterize success?

Dr. Callahan: This has been addressed by so many conferences, incubators, books etc. – so clearly no one has ‘the answer’ including me. At the same time, there are some fundamentals that hold true, speaking from my own experience as well as judging many pitch events and advising several entrepreneurs.

Perhaps two of the key factors are the depth of motivation and the resilience of the founders. You have to see the vision and believe in it, while answering tough questions every day, and solving problems from all sectors. You have to sell what does not exist, maybe never existed, and absolutely know you will make it happen no matter what – all while facing huge fear and self-doubt, for just a few seconds, before you resume pouring out positive energy again. Amazingly, these characteristics can be seen in successful entrepreneurs around the world. Motivation and resilience are critical to constant, untiring effort to address the ecosystem or cultural ‘degree-of-friction’ or resistance that always exists and varies by industry and geographical locale.

Characterizing success for a startup company is less clear today than it once was. Certainly, founders need to take the time to define success for themselves early on. For an entrepreneur in India or Africa, providing solar power for their village and making some profit is success. For an entrepreneur who has spent time in California, the media may suggest that success means becoming a millionaire overnight with an IPO or having a ‘unicorn company’. There are many steps and kinds of success, which require to be discussed by founders and teams month by month.

Those are the important questions that we all wish we knew the answers to! I have seen differences with each of my companies as well as the ones I mentor or evaluate. There are many, many factors that can affect whether a startup company survives, especially in the first critical year. The definition of success is difficult and often changes over the life of a company – if you are one of the lucky survivors! The factors are also changing over time as the company makes progress, because you must be nimble in today’s environment.

Once you get your company off the ground, another survival fundamental is that your product or service must solve a market need that customers will pay for. A key question is – does the team actually talk first-hand to future customers? In our world of massive data, some face-to-face exposure is critical to know whether people will part with their money for what you envision. Every design and decision needs to have the objective of making the company stronger for longevity. Personal agendas and self-interest have to be secondary.

 

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What do you think is the percentage of startups which have the abilities to achieve and at the same time survive the acquisition pressure from the giants? And why do you think so?

Dr. Callahan: General wisdom states that 90% of startups shut-down within a year. Extensive studies and data-crunching finds that new startup companies have a survival chance somewhere between 0.3 – 26% past the first year. The reality and the wonder of entrepreneurs is that we all know we will be the one to succeed! Funding is the critical and central point in this discussion. Startups depend on the life-blood of funding to survive and make progress. The ability to achieve depends on attracting enough funding to hit milestones and stay ahead of your competition. The world of funding is complex and changing, and a separate subject in its own right. At the moment, acquisition pressure from one of the large corporations is viewed as a good way for startups to have a financial exit for their investors. There are a lot of acquisitions taking place since companies are both flush with money and seeking innovation to stay ahead of competition.

 

When comparing the list of Fortune 500 most important companies in the United States from 1950s and today, 88% of the companies are not on the list anymore. Why do you think that is? Do you think it is possible to be permanently successful and hold onto the ranking longer than 50 – 100 years? Just think of today´s icons, such as Apple, Alphabet, Tesla etc. In his book for managers Good to great, James Collins talks about this achievement; what is your opinion?

Dr. Callahan: Analyzing companies’ survivability over 50 – 100 years may benefit from using four different global ‘lenses’ when looking back or forward over a 70 year time period. Those global, societal lenses are communication, transportation, education, and the legal environment. Each ‘lens’ has had variable rate-of-change over this timeline.

But first, the most fundamental question begins with ‘what is the purpose or mission of a company?’ It is my position that the currently accepted mission and fundamental economic model of ‘increasing shareholders’ wealth’ is fundamentally flawed. Much has been written about the unintended consequences of this one overarching objective. Many corporate and private equity acquisitions have resulted in the disappearance or bankruptcy of countless companies.

History tells us what happened to the Baby Bells and railroad companies. A current icon, Amazon, has been successful for 26 years since its founding in 1992. Will it remain robust for another 26 years in the face of quantum computing, emerging economies and changing global laws? Will phone implants, self-driving vehicles, robotics and artificial intelligence make it grow even faster? The nimbleness of leadership will need to continue to proactively embrace change and apportion profits to invest in the change needed for the long term – as Jeff Bezos has done since the inception of Amazon.

 

How do you think the current trends ‘sector disruption’ will influence future development of startups?

Dr. Callahan: Sector disruption is both caused by startups as well as opens opportunities for more innovation. Great examples are currently underway in fintech, 3D-printing, medical robotics and logistics to name a few of the areas with good venture capital money and deal flow. Let’s go back to the four lenses analysis. Technology disruption in communication is far enough along to be affordable and available nearly everywhere on Earth. This was a good time to leverage that disruption with payment app startups. In India in 2017, there were over 85 million active unique mobile wallet users.

 

According to your experience, to what extent does quality of education influence the managing of a future startup success?

Dr. Callahan: Quality of formal education alone as affecting startup success has been studied extensively by the Kauffman Foundation and many, many other groups at universities, governments, incubators, ‘clusters’, etc. The data shows that although quality of formal education is a substantial factor, it is not a sufficient factor by itself. There are several examples throughout history that are variously used to argue in any direction that is close to the heart of those arguing. The reality so far is that traditional, formal education alone does not come close to predicting startup success.

My experience has shown that education, knowledge, experience, and creativity have to be considered for the collective team of founders, employees, advisors, investors, etc. for startup success. Entrepreneur’s backgrounds need to be examined beyond the confines of institutions in order to understand the contribution to the probability of startup successes. That being said, the collective ‘mental resources’ behind the effort all come into play.

 

How do you perceive capital values; where do you think they are the most persistent in the long run?

Dr. Callahan: Capital efficiency, investment, return-on-investment, profitability, market-share growth, acquisitions, trade-wars and tax-law specifics present a complex set of considerations. The intersection with innovation, startup companies, government programs and a variety of incentives opens many more possibilities. This is where a team or ecosystem of individuals with a range of knowledge can assess each opportunity based on the most relevant facts.

 

 

Is the success of a company only in the hands of the founder or do you think the geographic location, where the company is located and operates, has an important impact as well?

Dr. Callahan: Geographic location and the country are critically important. The societal culture of the location will definitely play a role in the motivation and the resilience of the founders that I talked about earlier. The degree of persistence required also varies with the ecosystem or culture’s ‘degree-of-friction’ or resistance-to-change dependent upon the industry and geographical locale. Several countries have excellent government grant programs available for innovation funding that have been slow to achieve goals due to cultural mismatch, which are now also being studied.

This is another area where the four lenses of communication, education, transportation and legal environment will differ by geography, suggesting a longer analysis and conversation. The power and joy of entrepreneurship is that when needs exist, their demand to be filled creates great energy for startups.

 

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Do you think that the vertical structure of a company is still up to date? Do you perhaps expect further developmental stages?

Dr. Callahan: Vertical structures exist in a variety of ways in different industries and companies. The vertical structure of management hierarchy has declined significantly in the United States with technologies advancement in communication, databases and organizational software integration such as CRM, ERP and SCM. One example are the changes at IBM where layers of management decreased from 18 reporting levels decades ago to currently 8 levels. Vertical integration structure where companies expand up or down their own supply chain is currently very changeable and dependent on industry, competition, scale and scope. Examples here are Walmart, Amazon and Taiwan Semiconductor Manufacturing Corp (TSMC). These areas will continue to shift as seen with General Electric streamlining and Apple continuing to expand.

 

Is it possible that during the disappearance of entire sectors their replacement will be ‘without complications’ or complications will arise and crisis along with them?

Dr. Callahan: I believe it is good to expect complications as a norm since human beings, companies, governments all resist change for self-preservation. But only to a certain point. It is easy to imagine that blacksmiths resisted automobiles right up until they bought their own! When the effectiveness, safety, ease, cost advantages are obvious, occasionally sectors disappear with less resistance-to-change. For example, antibiotics are superior in every way to poultices of the past. At the same time, the complications during replacement transitions are often ‘created’ by competitors to keep the door of opportunity open for their product or service.

 

 If you had a chance to make a wish which would be feasible, what would the wish be?

Dr. Callahan: This is the most difficult question, since I am not sure this is feasible… I would wish that consideration of ethics would occur much earlier in the progression of technology and support formation of good guidelines and laws. And that this could occur on equal footing with the overarching drive for profit, wealth and power. This is on my mind as we all accelerate forward toward the convergence of robotics, machine learning, artificial or synthetic intelligence, and much more.

 

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