Utah may be known for many things, but who would have thought that Utah, and particularly Brigham Young University (BYU), would be participating in the transformation of entrepreneurship?
I spent last weekend in Utah at BYU as a guest of Professor Nathan Furr, (a former Ph.D. student of our MS&E department at Stanford,) where they are set on being a leader in developing the management science of entrepreneurship. The most visible step was the first International Business Model Competition, hosted by the BYU Rollins Center for Entrepreneurship and Technology.
What’s A Startup?
We’ve been teaching that the difference between a startup and an existing company is that existing companies executebusiness models, while startups searchfor a business model. (Or more accurately, startups are a temporary organization designed to search for a scalable and repeatable business model.) Therefore the very foundations of teaching entrepreneurship should start with how to search for a business model.
This startup search process is the business model / customer development / agile development solution stack. This solution stack proposes that entrepreneurs should first map their assumptions (their business model) and then test whether these hypotheses are accurate, outside in the field (customer development) and then use an iterative and incremental development methodology (agile development) to build the product. When founders discover their assumptions are wrong, as they inevitably will, the result isn’t a crisis, it’s a learning event called a pivot — and an opportunity to update the business model.
Business Model Versus Business Plan
The traditional business plan is an essential organizing and planning document to launch new products in existing companies with known customers and markets. But this same document is a bad fit when used in a startup, as the customers and market are unknown. A business plan in a startup becomes an exercise in creative writing with a series of guesses about a customer problem and the product solution. Most business plans are worse than useless in preparing an entrepreneur for the real world as “no business plan survives first contact with customers.”
I suggested that if we wanted to hold competitions that actually emulated the real world (rather than what’s easy to grade) entrepreneurship educators should hold competitions that emulate what entrepreneurs actually encounter – chaos, uncertainty and unknowns. A business model competition would emulate the “out of the building” experience of real entrepreneurs executing the customer development / business model / agile stack.
The 47th (-46) Annual Business Model Competition
From the seed of this initial idea last summer Professor Nathan Furr, and his team at BYU created a global business model competition, receiving over 60 submissions from across the world. Alexander Osterwalder, Professor Furr and I were the judges for selecting the winner from the final 4 contestants. The finals were held in the packed 800 seat BYU Varsity Theater with lines of students outside unable to get in. It was an eye-opener to see each of the teams take the stage to describe their journey in trying to validate each of the 9 parts of a business model, rather than the static theory of a business plan.
Each team used the business model canvas and customer development stack to go from initial hypotheses, getting outside the building to validate their ideas with customers, and going through multiple pivots to find a validated business model. The winner was Gamegnat, a gaming information portal (take a look at their presentation here.) At the end of the competition Gavin Christensen, managing director of Kickstart Seed Fund said, “This is going to change the way we invest.” A nice testament to the visible difference in the quality of every teams presentation. The competition was an inspiration to the students, mentors and teaching teams.
Utah: Entrepreneurial Surprises
While I was in Utah, my host kept me busy with a series of talks. I spoke at lunch to a room of 400 entrepreneurs and investors from the region about the business model / customer development stack. I was quite surprised to find the depth and interest in innovation and sheer number of startups that I saw. I was even more surprised to learn that University of Utah has gone from being ranked 94th in the U.S. for startups created from university intellectual property to number one.
When I met with the faculty and Deans at BYU they were proud to tell me that they were number one in the U.S. for startups, licenses, and patent applications per research dollar. BYU has embraced an e-school approach, changing their curriculum to develop and teach the ideas in the business model / customer development stack. Their vision is to make the Business Model Competition an even larger international event, creating competitions at partner schools and providing the materials and insight to create a network of business model competitions culminating in an international finals event. And they are ready to share!
Keep your eye out for more details about creating your own competition, or contact Nathan Furr directly.
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Filed under: Business Model versus Business Plan, Teaching, Venture Capital |
Steve,
Thanks for sharing information on the Business Model Competition at Bringham Young University (BYU). I strongly believe and support that entrepreneurs should first focus on conducting Business Model Experiments (BMEs) in order to minimize business risks and maximize opportunities in the startup phase. As you note above, the Business Plan is more relevant for predictable situations such as when a product/service-customer fit has been validated during the course of the initial Business Model Experiment. For me, a Business Plan should focus on plans/forecast, strategies, and performance management for Business Model Optimization and Scaling.
I applaud you for your tireless efforts and leadership in the Entrepreneurial Revolution.
Finally, long live the Entrepreneurial Revolution. Long live Business Model Experiments!
Best,
Rod.
Just wanted to thank you for coming to Utah to speak to us. I listened to your presentation via webcast and spoke with others who heard it live or over the web. The response is universally favorable and appreciative. I loved what you had to say.
Steve – Glad you enjoyed your visit to our southerly neighbor – I like Nathan & I’ve many connections to the Utes.
One key to both schools is much like Stanford’s STVP — embrace the entrepreneurial community & bring fully into the ‘tent’. Not as people who might exploit the university but as the people holding the keys to turning an invention into truly an innovation.
Brian Cummings (the TTO genius at U of Utah) helped me with a working paper to explain the U of Utah’s meteoric rise in entrepreneurial spinouts (http://bit.ly/buI3uU). If you have any critique, we’d be grateful.
It’s been downloaded nearly a 1,000 times but the usual reaction is either:
a) “Oh, that’s how we do it.” (and they don’t, LOL)
-or-
b) “We could never do it because our bureaucrats insist on controlling it.”
It amazes me that so many universities seem down right hostile to the idea of becoming entrepreneurial. They can only see the bureaucratic imperatives… Sigh. (But it does mean Utah & BYU.. & Stanford get quite the edge in the marketplace.)
Hi to Tina & Tom at STVP – they are aces! I look forward to seeing them in March at REE/NCIIA in DC.
Here’s to 2011 being truly the Year of the Entrepreneur!
NK
Comments from Hacker News
zachallaun
Being one of the few teams not from BYU, I was initially a bit worried about potential biases in judging. Quite to the contrary, the people at BYU were incredibly kind and welcoming, and made the experience a generally awesome one.
My co-founder and I had the fortune to spend a large part of the weekend with a CS PhD candidate from University College London. He had been a part of Business Plan competitions run in the London area for the last few years, and was effectively sent as an envoy to see the benefit of a Business Model competition. After talking to him and competing in said competition, I’ve come to realize the underlying benefit: The emphasis on input over output truly puts BYU’s competition above the rest in terms of practicality and learning.
As an aside, my co-founder and I make up Gamegnat, the team that took first place at the competition. We’re currently exploring options for MVP creation, and would love to talk to anyone with a passion for gaming and web development that may be interested in working with us in a founder (significant equity) or freelancer (cash) capacity. See profile for contact info.
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justinmares
Congrats on winning the competition! I did a bit of searching and saw your presentation, http://prezi.com/iyjcef23lmez/copy-of-gamegnat-bmc/.
Wow. Did you use powerpoint to make that? It’s one of the best presentations I have ever seen. Good luck developing the MVP, it looks like it could be a fantastic community.
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sandipagr
It’s using Prezi. I agree the presentation is top notch. No surprises they won!
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zachallaun
Sandip is correct! Big thanks to the team at Prezi — it was great fun using their tools to create that presentation.
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ryanelkins
I was at the lunch he mentioned – we have a good startup community here in Utah but it was surprising to see the number of people that showed up to hear him. I hope to see the number of scalable startups in Utah increase over time.
reply
This first thing I do with business plans is thrown them away and just meet with entrepreneurs. Meaningless documents. Thanks for preaching this important change in philosophy.
A huge thank you to Steve Blank for judging the BYU BMC! It was an honor to have you with us in Utah!
Also, Gamegnat, you killed it and deserve every bit of recognition you’ve received. I wish you the best of luck.
On a personal note, Kalood (my startup that placed 2nd) is launching private beta testing very soon. Go to Kalood.com to request an invite. Shameless, but it will be worth it. 🙂
I was at the entrepreneurship luncheon and wanted to thank you for your excellent speech. I just finished studying entrepreneurship for 2 years in business school and probably learned more from listening to you for 30 minutes. Thanks!
This event is representative of the thousands of individuals around the nation/world that are part of the “entrepreneurial revolution” you referred to in your blog just prior to Thanksgiving (When Its Darkest Men See the Stars). Your positive vision of the economy for this decade inspires appreciative questions that do and will lead to vital answers for optimal living in the 21st Century. Indeed, “there is something happenin’ here” and in a small way “what it is, is beginning to be clear. Thanks to all you do to promote better living through collaborative entrepreneurship.