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we're here today with Wharton professors Laura Huang and anoop menon to talk
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about their new paper which looks at entrepreneurial activity and the impact of watershed moments anoop and Laura
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thanks for being here with us today thanks for having us so first of all could you please give us a quick summary
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of the problem that you were looking at that you're studying in this paper absolutely ah so this is a question
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that's near and dear to both our hearts we're big aerospace buffs and so the
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question we were starting with is we look at the aerospace industry and even the past five years or so there's been a
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huge amount of buds right so there's Elon Musk there's Mars colonization
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these days you know space travel but on the other hand this aerospace is an industry which is a classic example of a
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hard to break into industry this is a really entrenched industry very high entry costs because of capital
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requirements skills that are required the top engineers that you read regulatory connections that you need to
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have so just like if you were to ask me a classic example of a high entry barrier industry this would be it many
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people had tried to enter it to do private space and had failed but all of a sudden in the past a decade or so big
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change so that's what kind of got us started like okay what happened here why
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what drove this changing can we understand something about industry evolution and entrepreneurial entry by
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studying this particular case so yeah we were kind of we were interested in this
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sort of aspect that there's these new private firms that are entering this industry right so um so I was really
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interested in looking at these private firms anup was really interested in their cognitive models and and their
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mental models and our third co-author Tiana's Azul who's at London Business
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School was also interested in this aspect of entrepreneurial entry and so we have this industry where in the past
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it's been so difficult to actually enter but yet we see that this progress has
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been made in the past sort of decades so we really wanted to investigate why that
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was and how did that happen great now total tell me a little bit about how did you do that
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then what did you find once you did that because it seemed to me that that's a
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pretty amorphous thing to try and study so I mean how did you go about looking at it absolutely so we basically we
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recognize that this has been this is an industry that has a lot of history obviously so we went back back to the
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1950s and even earlier than that we've been looking at conference proceedings
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so we have 21,000 articles conference proceedings documents dating back to that time period all the way to the
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present day and so we looked at sort of what was happening what are these the changes where do these changes come from
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and we also supplemented it with lots of interviews with regulators engineers people at all these different sort of
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all of the different touch points that that that would be in this industry in fact one of the fun things to really fun
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things about this project was I got to talk to an astronaut I got to talk to a colonel in the Pentagon I got to talk to
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NASA people's was spent at sometimes on this very dangerous right sometimes all
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in the same day sometimes you write and and there they've been incredibly willing to kind of share their own
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thoughts on this industry and so we've used that and and looked at the both the
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the conference proceedings and all these documents we had and kind of tailored it
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and and thought about all of these different angles that we could look at it now was there a particular watershed
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moment cuz like when you say a watershed moment is it always one specific discreet thing or can that be a little
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more like is that it can be a little broader than that like when you say that was there one one moment for this
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industry or was that one moment sort of a bunch of different things that happened or right in fact it might be
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helpful to just build up a little bit to that right so the literature if you are
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the academic literature on change art and like how do industries change where the opportunities come from they tend to
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look at either like big breaks in technology so technological discontinuities or big regulatory shocks
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that happen or some sort of like social movement collective action gonna these are like three big buckets that have
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been talked about and there are aspects of that here too but here what was interesting is the
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cognitive element as well and that's where this watershed moment comes in and
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what what we mean by that is if you think about any industry especially these kind of stable long-standing
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industries you have the major players in the space who all have beliefs about who
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does what how things work the rules of the game if you will almost tacit rules of the game and if anybody tries to
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deviate just by themselves they get kicked out or like they get pulled back into it right so these are relatively
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resilient mental structures or collective mental models that kind of define the rules of the game for the
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industry and what we're trying to say is that these watershed moments are big
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shocking events which caused actors in a space to like really sit back and wonder
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hey should things really be this way always and so to your question we had least from our chats it resonated very
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very much with what the articles were saying as well two sets of watershed moments one ok there's the initial big
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watershed moment which is the Sputnik moment and it is a term by itself right so Sputnik gets launched and all of a
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sudden over here we freak out like oh my god and that causes NASA to be found at
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DARPA to be founded big changes all of a sudden space goes from being a backwater
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to being top of you know this is the Cold War being played out in space so that gels the collective mental model
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around the belief that Oh space is for big governments big firms failures not an option a lot of money is required
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only the top talent can be here so that's the set of beliefs that gels around this goes through the Apollo
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program through the 80s as well the shuttle program but the first set of shocking watershed moments happen at the
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end of the 80s so you get the Challenger disaster which very shockingly very vividly demonstrates to the public that
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you know what maybe the government doesn't always get it right maybe you know things can go really badly wrong
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the same time you get the Cold War ending the berlin wall falling like literally
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and that causes many people to question like okay why are we spending so much on
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space it's amazing Russia we're not great there is no USSR in there's no
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Soviet so so and then committees get formed like how do we rethink space so that causes what we call like the
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initial shake-up of the model and then there's the service so that's so what
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your new biz kind of referring to is this dislodging of this mental model that was there right so we see that as
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he's mentioning that a lot of this entry that a lot of this disruption that we've
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seen in the past was happening through technological discontinuities the regulatory discontinuities through
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collective action but what we're finding in our in our data in our analysis of
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this context is that it's these these cognitive discontinuities that are from
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that are catalyzed from these watershed moments so watershed moments here are these very emotionally resident very
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publicly sort of recalled moments that we're seeing like Challenger right like
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the fall of the Berlin Wall and those dislodged and then we find three other ones that kind of Risa Lydda fide that
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that brought about this new mental model right so we had in 86 right challenger in 89 we had the Berlin Wall and then we
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have um then we have Columbia the Columbia disaster right again something that we all vividly remember right i can
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remember watching this and and and can recall where i was when when columbia happened and then we also have you know
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the awarding of the COTS contract and Ansari X PRIZE Ansari X PRIZE actually came first right so we have we're seeing
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that there's this public this new entrant this relatively unknown company that's getting awarded this contract
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that prior to that was going to people that were connected to the government that were connected to NASA right and so
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we're seeing this sort of shift that's Risa Lydda fying into something that's
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that's we believe now that it's not just the entity it's not just the government
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it's not just a National endeavour now there's this public these public firms
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sorry these private firms that are kind of coming in and so the story at least the
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way we said in the paper so we had that initial model which is called the old space of the big space model gets really
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shaken at the end of the 80s and then the government actually tries pretty hard to encourage private sector
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engagement they try different programs through the 90s but there isn't much success in fact there is a Texan banker
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billionaire call Andrew bill he's like Elon version 0 point 0 like you know before he alone who put in like hundreds
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of millions of his own dollars into Beale aerospace his private space venture but he shot sharp in two
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thousand or so and there's a very public letter that he put out where he blames
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NASA basically says hey you say you want private space to be involved but you're
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still making your sweet deals you give you sweet deals to Boeing and Lockheed zuv the world a big the the cost plus
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contractors the primes as they're called we small guys we just can't compete and
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so he shut shop right so this is transition period where we're trying to bring in private space but we don't know
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how to do it there is no consensus or a collective mental model on how this should be done but then once after
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Columbia happens and then the Ansari XPrize everybody to the T keeps talking about how the ansari x prize was such a
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big moment all of a sudden you go oh my god a private company with private money
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was able to build a plane which went to space came back turned around did that again people private people can actually
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do this that's like a big shock to everybody now they actually believe it as possible once they believe it is
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possible things start to get into motion right so then we have the precursor of the COTS contract like people put
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together commissions and oh we should really treat this like a like almost like a venture capital like NASA should
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become more like a venture capital firm rather than this cost plus regulator who's controlling everything it's a big
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mindset shift that happens and then you start converging towards the new model that we see today that's the story
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and now with this research so first of all what can the space industry take from this but then also what can other
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industries take from this yeah I think that's a it's a great question because
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we we are relatively contextualized right we're looking at this one industry
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and so something that we'd love to do is to look at other industries as well but
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I think in general right we tend to think that disruption and we tend to think that new industry emergence
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entrepreneur emergence happens from these big technological shocks write something big happens and that paves the
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way for other new entrants to come in or there's a big regulation that kind of
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changes things that changes the incentive structure that allows other people to come in and what what I think
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industries can take from this is that it's more complicated than that there's
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lots of things that are that are happening there are these emotionally resonant events that are happening all
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the time we don't know what form it's going to take necessarily but they are
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affecting the mental models and things are happening so even if there are technological shifts it's co-evolving
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alongside these other changes in our ways of thinking and our mental models are mental schemas and prototypes and
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all these sorts of things these collective ways of these collective beliefs and so keeping that in mind as
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industries are involved evolving and how as companies are trying to play within these these sort of rules is really
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important I think to adjust quickly build on that may be another way paraphrasing that would be you know in
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the strategy courses entrepreneurship courses we say oh where are opportunities let's analyze the industry
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landscape let's analyze the technological landscape and regulatory landscape to find where the
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opportunities are we're saying is that maybe we can also analyze the mental landscapes the cognitive landscapes of
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the agents what they believes are and how they're changing as another avenue
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to think about where opportunities might be and where change might come from well
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cuz it definitely seems like with the state with the case of space that I mean the technology was there for a long time
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but people didn't believe that it could happen privately and so it does seem to
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be kind of a I don't know cautionary tale almost to other industries that I mean you may have the technology to be
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able to do it but if people don't believe you can do it or don't believe
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it's your place to do it then they're not gonna buy into it anyway perfectly silly yeah the
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technologies absolutely it's an enabler right so even in in new space in the
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aerospace industry what we're seeing you know we tend to think of it as a very
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technologically heavy sort of industry and there are advancements right and those are enablers without the internet
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this wouldn't have happened without other sorts of things but those were not
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responsible for the disruption they were not responsible for this this entry in fact you know a noob has had people say
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to him you know I could go to home depot and I could pick up some parts and still
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make this this sort of habit and that's not to say this is not very technological right so um but but these
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are we're seeing lots of incremental advancements we're seeing lots of other
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things it's not one big technology shift that or one big technology disruption
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that was causing this and the other thing is exactly as you said it's the tech that catches the attention right
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everybody like oh the tech change it or maybe even some regulatory change but the cognitive things a bit subtle and
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and to understand that even if you have the best in class tech like so I've had
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rocket scientists who are like the best in the business like we know how to do this we've done we've had the capability
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for decades but nobody would believe me nobody would fund me so what can I do right great there you go now how it's
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interesting to me like because one of the things that this research seem to rely a lot on was actually person to
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person interviews I mean data as well but also really sit down and talking to people and these days we hear a lot from
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companies about I have to analyze my data I have to analyze my data so when you're looking companies that want to
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analyze mental models I mean is this what they need to do to they need to go out and talk to people I mean and how
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would they go about doing that like it seems like that's almost like the opposite of what we almost seem to be
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encouraging companies to do today like you need to look at data but this looks at people well there's such a big put
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with me we talk so much about big data now and I think data is absolutely it's
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critical we need data in order to make our decisions but we also need to remember and some of both of our other
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work looks at this very aspect of you know data you need to also have a lens with which to analyze
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this data with which to understand this data and that's where i think these sort
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of personal interactions bringing together what your mental model might be looking at different contacts that's
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really necessary in order to make sense of the data because even though you have
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all this data you still need to find a way to slice and dice the data pick out which things you're going to to focus on
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try and analyze it in a way that's it's cohesive and make sense so all of this
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sort of goes together and just add that's kind of funny that you ask that because one of the other research
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streams that i have is actually working on big data and machine learning and one
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of the things that I'm trying to do with that is to extract people's mental
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models from what they say and what they do using big data techniques so while talking to people is still what I like
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to do and that's like really the you know that's one very good way to get at
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this I don't think it rules out data either there's a lot that you can say
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about how people are thinking that you can do from doing machine learning on that as well so kind of speaks to the
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idea that people need to sort of do both or use one as a lens to look at the other and corroborate even like it
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complements each other's in fact it's funny because one of the reasons why we
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started working on this paper together is because we were both interested in in these this kind of cognition that's
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happening but also these emotional sort of resident events and anoop looks at it
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from one angle where he's looking at the big data on how you can actually I'm
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looking at it from intuition and gut feel and so a lot of our you should see some of our conversations where we're
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going back and forth Pinchbeck and then we kind of meet in the middle and think about the ways that both of those things
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are important and impact what it is we're looking at so it's been kind of a
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fun journey just in that in the different angles that we've both come at understanding cognition emotions and all
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these different things that that were capturing here now what would you say sets this research in particular apart
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from other research that's been conducted on similar topics or on this topic yeah you won't want me to take
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this oh yes so I think that um what we mentioned a little bit before is that you know there are different ways of
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understanding and urgence and entrepreneurial entry and we've seen lots of these different ways
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that that definitely resonate in in a lot of different context and this context as well right but what we're
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finding here is that there's another route that perhaps could co-evolve with
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these things so it could co-evolve it could potentially supplant it could be so you do have these these different
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ways that emergence is happening we also find that through these emotionally resonant events through these watershed
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moments that there are drivers there are catalysts that are changing the way that
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proceeds and so I think it's important to get this holistic you know how are we
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actually understanding this in all of its complications in all the different forms that it could that it could hash
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out and the ways that it could come about and so I think that's something that we were a little bit surprised
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about that it could both there are instances where it co-evolved zor instances where this might be driving
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the effect and that it's important to understand all these different factors
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no can you only with a watershed moment I mean can you actually identify a watershed moment while it's happening or
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is it only possible to do that looking back it's a very good question yeah right now it's all historical right so
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it's what people are saying and what we can see in the text can we do it live
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something we need to think about I'm sure psychologists can like Laura can quickly develop metrics to see like the
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emotional resonance that certain events are having what long-term impact that it
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could have on the industry good question yeah I think I mean in order to understand the mental models right so a
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lot of this is because there's this solidifying sort of process we could perhaps identify this is an important
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emotionally resonant event but to actually understand the effect of that right there is some more sort of things
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that that need to go into this but also you know something that anoop and I have
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talked about is that it's really important to understand how this continues to evolve right so anup just
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this morning was talking to me about you know there's also these negative these
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negative events that we're seeing right something goes wrong and some things
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blowing up we see this all over the news all right and so it's important to continue to to track this
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you want to say more about that because you actually this was something we talked about just this morning yeah I
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mean recently SpaceX is the rocket exploded on the launchpad and I can't get big like it literally blows up right
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and this people have said this is a very touchy industry exactly because how visible and explosive everything is and
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people are worried that one big failure is enough to go back to where we were so
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to your question what determines the impact that any one event is going to have I think that's a great question for
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future research and that brings us to my last question is there anything else you
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guys plan to look at in the future where how to continue this research yeah I mean there's a number of different
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things right so we want one thing is we want to understand a little bit more of the micro drivers of this right so right
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now we're looking at what's happening we're looking at these changes in mental
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models but one thing that we've talked a lot about and with our co-author teona
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as well it's kind of understanding a little bit more of the the granular mechanisms behind this and what's
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actually happening on this more individual level and the other thing that we mentioned a lot is just you know
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the context right this is an in-depth look into one particular industry one particular context we believe there's
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other context where these emotionally resonant these watershed moments are going to have this big effect on mental
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models but they may operate in different ways in some industries it could be technology that's driving in and these
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watershed moments are taking more of an ancillary role or it could be the opposite there's lots of different
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iterations of how of how this could come about so I think those are all different
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things that we that both we as well as other scholars will continue to look at so that we can really understand this
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phenomenon of entry and disruption and yeah I knew pollera thanks so much for being with us thank you thanks for
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having us you