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D.R. Widder is the Vice President of Innovation and holds the Steve Blank Innovation Chair at Philadelphia University. He’s helping city government in Philadelphia become more innovative by applying Lean startup methods and Philadelphia University’s innovation curriculum. I asked him to share an update on his work on teaching lean techniques to local governments.
This February Philadelphia University and the City of Philadelphia founded the Academy for Municipal Innovation (AMI). Our goal is to foster innovation principles and practice in local government by changing the way government employees think about innovation and act on their ideas. We just graduated the inaugural class. Here’s the story of our journey.
The Academy for Municipal Innovation has come out of collaboration between Philadelphia University and the City of Philadelphia. Soon after I came to PhilaU as the chief innovation officer, I met Adel Ebeid, who was newly appointed as Chief Innovation Officer for the City of Philadelphia. We bonded over our similar challenges, as Adel was only the second chief innovation officer in city government and I was one of the first chief innovation officers in higher education.
Building a Government Innovation Curriculum
The Academy for Municipal Innovation curriculum is built on Philadelphia University’s distinctive approach to innovation education – it’s collaborative, multidisciplinary, and engaged in the real world. The curriculum draws from Philadelphia University’s design, engineering, and business disciplines, as all are needed to make innovation relevant in the government.
The program is built around five core innovation practices that we teach:
- Integrated Design Processes – The process of opportunity finding, innovation and problem solving
- Business and Operations Models – How to describe, design, challenge, and evaluate innovation
- Systems Thinking – Methods for gathering and mapping out all stakeholders and influences surrounding an issue and solution
- Research Methods – How to find actionable insights and ask the right questions.
- Innovation Leadership – How to develop innovative teams and culture.
We took this these core innovation practices in the form that has worked at the undergraduate level, and adapted the processes and content for the working professional in the government.
The Academy for Municipal Innovation (AMI) curriculum
We deliver the class to government employees in an Executive Ed format comprised of seven 4-hour sessions.
Each class is a mix of theory and practice. A key design principle is that each session includes at least one tool that participants can use the very next day at work, so they can make it real immediately. For example, simple brainstorming techniques like “Yes, And” and “Silent Brainstorming” were put to use the same week they learned them.
We select one common theme that runs through all the classes for continuity, and they build upon it as they go. The theme for the pilot class was “How can the city better communicate and advance innovative ideas”. We built on this theme teaching the students opportunity finding, concept development, stakeholder mapping, systems dynamics, research, and business models perspective, culminating with a capstone workshop where they bring it all together.
The strategy is to take participants from across the full range of city organization chart to seed the culture change. The pilot class (we call them the Pioneers) learned innovation principles and tools, and will bring them back to their groups and spread the word. For example, a subset of the class self organized around how to better service businesses starting and operating in the city. They used the capstone to pilot a process that they plan to take back to their organizations and implement at scale.
Scaling the Academy for Municipal Innovation
We see the Academy for Municipal Innovation scaling in three dimensions:
- Culture – graduates become change agents in their home groups, and change their group culture locally, amplifying the impact of each graduate
- Depth – The certificate program can be expanded into courses for credit, and ultimate a master’s degree in innovation in government.
- Reach – As we move out of pilot, we will offer this program to other city governments (and other levels of government). Success in Philadelphia will make us a flagship for innovation at the city level.
- The bar is low but the need, and receptiveness is high for government innovation. The students in the Pioneer class have actively challenged ideas and assumptions, and are already applying what they have learned in their work. Today.
- Creativity, collaboration, and critical thinking skills transcend context, age, and pre-existing knowledge. These skills are teachable/learnable and no matter how good you are, you can get better.
- Leadership buy-in to innovation is that much more critical to success in government contexts.
- Government doesn’t get to ‘opt-in’ to problem solving or choose which problems it will tackle. The government innovates with the hand it is dealt to a greater extent than the private sector.
- The scale of a city as a building block is compelling for change and social impact. It is less complicated and with less inertia than the state and federal level, making the prospect of change more manageable.
- “Municipal Innovation” might be an oxymoron to the cynic, but cities have scope, and levers of influence, that industry does not. Changes in policy, regulations, civic engagement, unique partnerships, social programs, and different funding mechanisms are all tools available for the municipal innovator.
- The ‘boot camp’ experience creates a new communication network. Our pioneer class formed strong bonds learning new things together, in a new and intense environment. In addition to traditional communication, the closely bonded students can reach across the silos directly to each other, built on the relationships formed in class.
Working with the City of Philadelphia on Academy for Municipal Innovation has left me exhilarated. The city leadership, and members of this pioneer class, are committed to real innovation in government. They are taking on systems highly resistant to change, with diverse stakeholders in intricate relationships, under public scrutiny and political complexities. The magnitude of the challenge and their commitment is inspiring.
Henry Chesbrough is known as the father of Open Innovation and wrote the book that defined the practice. Henry is the Faculty Director of the Garwood Center for Corporate Innovation, at U.C. Berkeley in the Haas Business School. Henry and I teach a corporate innovation class together.
Thanks to Steve for the opportunity to share my thoughts with you all. This post follows directly on Steve’s earlier excellent post, Why Companies are not Startups.
The question of how corporations can be more innovative is one I have wrestled with for a long time. For those who don’t know, I wrote the book Open Innovation in 2003, and followed it with Open Business Models in 2006, and Open Services Innovation in 2011.
More recently, Steve, Alexander Osterwalder and I have started sharing notes, ideas and insights on this problem. We even ran an executive education course last fall at Berkeley on Corporate Business Model Innovation that helped each of us understand the others’ perspectives on this problem. In this post, I want to share some new thoughts that build on Steve’s post, and connect them to Lean Startup methods. However, I will then argue that while these methods are necessary to managing new ventures inside a company, they are insufficient.
First, let me recap a key insight for me from Steve’s post. A startup is a temporary organization in search of a repeatable, scalable business model. A corporation, by contrast, is a permanent organization designed to execute a repeatable, scalable business model. While a simple statement, this is a profound insight. When companies want to innovate a new business model (vs. innovating new products and services within an already scaled business model), the processes that companies have optimized for execution inevitably interfere with the search processes needed to discover a new business model.
This has serious implications for corporate venturing, for innovating new businesses – and new business models – inside an existing corporation. The context for an internal venture inside an existing company is dramatically different from the context confronting an external startup out in the wild. The good news is that corporations have access to resources and capabilities that most startups can only dream of, whether it is free cash flow, a strong brand, a vibrant supply chain, strong distribution, a skilled sales force, and so on. The bad news is that, as Steve reminded us above, each of these assets is tailored to execute the existing business model, not to help search for a new one. So what seem like unfair advantages for corporate ventures become inflexible liabilities that block the search process of the venture.
But the contextual differences go even beyond these substantial differences. A corporate venture, struggling to search for a new, repeatable and scalable business model, must wage that struggle on two fronts, not just one. The external startup has to work long hours, and make many pivots, to identify the product-market fit, validate the MVP, and articulate a winning business model that can then be repeated and scaled. The internal venture must do all this, and more! The internal venture must fight on a second front at the same time within the corporation. That second fight must obtain the permissions, protection, resources, etc. needed to launch the venture initiative, and then must work to retain that support over time as conflicts arise (which they will).
Knowing Steve’s fondness for military metaphors, think of the corporate venture as fighting a war on two fronts at the same time. Just as Germany’s domination of Western Europe in World War II was eventually undone by its decision to launch a second front by invading Russia, so too unlike a start up, corporate ventures cannot focus solely on winning in the external marketplace. This leads to two key points:
Point 1: You have to fight – and win- on two fronts (both outside and inside), in order to succeed in corporate venturing. As Steve would say, this is a big idea.
One memorable example of this was Xerox’s internal venture capital fund, Xerox Technology Ventures (XTV). Launched by Robert Adams in 1989, this $30 million fund grew to over $200 million in the next 7 years, as it launched companies like Documentum and Document Sciences out of Xerox’s fabled Palo Alto Research Center. This financial performance was extraordinary, and put XTV in the top quartile of all VC funds launched in 1989. Ordinary VCs would use this success to raise an even larger fund, and try to create the magic once more.
But Xerox instead chose to shut XTV down in 1996, despite its external success. Why? XTV’s success created lots of internal dissatisfaction within Xerox. The success of Documentum and Document Sciences, they felt, came largely from Xerox technology and customers, yet the startup companies XTV funded got all the credit. Worse, Robert Adams and his two partners got 20% of the carried interest in the fund, resulting in payouts of $30 million to the partnership. This was more, far more, than the Xerox CEO was paid in those years. So XTV won in the market, but lost inside the corporation.
This leads us to:
Point two: Corporate ventures may need to pivot to obtain and retain internal corporate support for the venture. This is likely to be controversial for adherents to Lean Startup thinking because we traditionally think of pivoting to improve the product-market fit in the external marketplace. But astute corporate venture managers, realizing that they must fight the war on two fronts, will also be alert to the need to pivot if needed in order to keep the internal support they require in order to succeed. For example, the new venture might pivot away from current customers of the corporation in the early days of the venture, in order to reduce friction with the established sales force (who want to sell large quantities of the current product, not test minute quantities of some future product that may or may not ever be built in volume. Worse, the potential new product might give customers a reason to delay the purchase of today’s products).
This also suggests that the internal organization must be carefully designed and prepared in order to sustain internal support for ventures over time. Ventures that launch without this preparation are at great risk as soon as the initial enthusiasm for innovation begins to wane. One bad quarter for the company, or one transition for a key internal champion, or the arrival of a new CEO who wants to clean house, any of these unforeseen changes could spell doom for an unprepared internal venture program.
This suggests a further modification to Lean Startup: Get Upstairs in the Building. You will need strong, sustained internal support for successful internal venturing. You will need to get the bigwigs upstairs to sign up to the risks, and put structures in place to insulate and protect the ventures from the execution processes in a large company that will attack the new venture. Think of it as internal political product-market fit, and prepare to pivot in order to increase that fit (and your support).
We will continue our conversations, and I fully expect that Steve, Alex and I will have more to say about how best to structure and support new ventures inside a large corporation in future posts!
- Internal ventures face a different context than do external startups.
- Venturing inside a corporation is a 2-front war.
- Lean Startup Methods are necessary, but insufficient, to fight this war.
- An internal venture may need to pivot to gain or maintain internal support. Get Upstairs in the Building, to generate this support.
- Stay tuned, as Steve, Alex and I have more coming….
Listen to the blog post here
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With a ~$2 billion endowment the Kauffman Foundation is the largest non-profit focused on entrepreneurship in the world. Giving away $80 million to every year (~$25 million to entrepreneurial causes) makes Kauffman the dominant player in the entrepreneurship space.
Kauffman launched Founders School – a new education series to help entrepreneurs develop their businesses during the startup stage by highlighting how startups are different from big companies.
In January 2014 Part 1 of the “Startups” section of Founders School went online.
This group of six videos provides an overview of how to successfully do Customer Discovery. You’ll learn how to:
- get to know your customers
- devise ways to test your hypotheses
- glean insights from what you learn outside the building
- get, keep and grow customers
As in the first part of this series, I’m in good company – I’m joined in Founders School by Noam Wasserman of Harvard teaching Founder’s Dilemmas, Craig Wortmann University of Chicago covering Entrepreneurial Selling, Peter McDermott helping understand Intellectual Property, and Nathan Gold offering how to give Powerful Presentations.
These videos are not only great tutorials for founders but also provide educators with another source of well produced and curated resources.
And you get a tour of my living room and office…
Introduction, for Part 2 is here
Module 1, The Lean Method
- 0:50: There are No Facts Inside Your Building — Get Outside
- 1:28: Using the Business Model Canvas
- 1:49: Use Customer Development to Test Your Hypotheses
- 2:44: What is a Pivot?
- 4:24: No Business Plan Survives First Contact with Customers
- 0:24: What is Customer Development?
- 1:09: How Do You Start the Customer Development Process?
- 1:36: Customer Discovery is a Series of Conversations
- 2:05: The Founder and Customer Development
- 3:16: Real World Example of Customer Development
Module 3, Customer Development Data
- 0:31: Designing Experiments to Test Hypotheses
- 0:48: Doing Customer Discovery Without Collecting Data is a Sin
- 1:06: Insight is Key
- 1:49: Why Accountants Don’t Run Startups
Module 4, Minimum Viable Products
- 0:18: What is a Minimum Viable Product?
- 0:38: What to Test, Why to Test and How to Test
- 2:05: You’re Not Building a Product … You’re Getting Customer Feedback
- 2:53: Use MVPs to Run Experiments
- 4:15: Real World Example of an MVP
Module 5, Customer Acquisition and Archetypes
- 0:47: Get, Keep and Grow Customers
- 1:00: Create Customer Demand
- 1:46: Customer Archetypes: Getting to Know Your Customers
- 3:35: Matching Archetypes to Acquisition
- 5:28: Growing Customers: The Lifetime Value
- 7:35: The Biggest Mistake in Customer Acquisition
Listen to the blog post here
Download the podcast here
While the Lean LaunchPad class has been adopted by Universities and the National Science Foundation, the question we get is, “Can students in K-12 handle an experiential entrepreneurship class?” Hawken School has now given us an answer. Their seniors just completed the school’s first-ever 3-credit semester program in evidence-based entrepreneurship. Students are fully immersed in real-world learning during the 12-week Entrepreneurial Studies course.
Here’s what Doris Korda Associate Head of School and Tim Desmond, Assistant Director of Entrepreneurial Studies did, and how they did it.
Teaching students to think like entrepreneurs not accountants
We realized that past K-12 Entrepreneurial classes taught students “the lemonade stand” version of how to start a company: 1) come up with an idea, 2) execute the idea, 3) do the accounting (revenue, costs, etc.).
We wanted to teach our students how to think like entrepreneurs not accountants. Therefore we needed them to think and learn about two parts of a startup; 1) ideation – how to create new ideas and 2) customer development – how do they test the validity of their idea (is it the right product, customer, channel, pricing, etc.)
Our first insight was that if broke the class in half, and separated ideation from customer development, our students would understand 1) that an idea is not the company, 2) almost all initial ideas are wrong.
So rather than starting with their own business ideas, we decided to first give our students experience doing customer discovery on someone else’s idea. Then in the second half of our semester let our students come up with their own ideas and then run the customer discovery process on their own product.
Customer Discovery in the Real World
Our students first worked with two local startups who agreed to be their clients, on real-problems. These two startups had problems they could not solve on their own due to lack of resources—time, people, money. The startups and the teaching team crafted a challenge for the kids to tackle using the Customer Development methodology, Lean Launchpad tools and the business model canvas.
For their first startup, we chose a 3-year old funded company that was working to refine its customer segment and channel for its physical product. For the second startup, we chose a year-old web/mobile startup whose market is college bound teens, with a founder who had skipped the initial customer validation process. These two startups served as the students’ introduction to customer development methodology. Each student team conducted over 100 detailed interviews in an effort to develop results for each client.
Because these were high school kids with, for the first time, a real business relying on them, this portion of the class shook them so badly they couldn’t move from their seats–literally. All their hard-wired school habits turned to dust as the kids realized their school tools were useless: there were no solution keys, no rubrics, no answers in the back of the book. Feeling the pressure, after 3 wasted days, one student on one team finally convinced her team they needed to get out of the building, like in Steve’s video. That’s when everything changed.
Knowing they had 3 weeks before presenting to the company co-founders, the kids felt intensity like no traditional classroom could generate. The pace and uncertainty of the class picked up and never let up from that point.
The second startup, because it was in an earlier stage and more complicated than the first, had the kids going even deeper into the 9 blocks of the business model canvas. Because the students’ customer development narratives revealed the client’s user interface was problematic, students with no programming experience began redesigning the user interface using Lean UX principles, tools and strategies.
Yet students were still afraid to rethink the client’s product: “if we tell [her] how to unclutter the interface, it will cost her a ton of money and she’ll be mad at us.” One of their mentors, a professional UX designer, encouraged the kids, “You have the facts. You’ve developed archetype and narratives from a ton of real customer interviews. You need to propose disruptive solutions. What can you propose that will solve the customers’ problems and set this product apart in a meaningful way?” This was a huge learning moment. Their final presentations were substantive and evidence-based.
Starting Your Own Company
For the last three weeks of class, the 16 students came up with their own business ideas that they pitched to their peers; 4 of these ideas moved forward in the quest for viable business models. Interestingly the four founders of teams whose ideas “won” argued over which team would get the students with the most advanced technical skills. By the end of the half hour, students were suggesting that our school should offer more programming earlier in school and throughout this course.
We assigned one mentor to each of the four teams and used LaunchPad Central to hold all the details together, including hundreds of customer interviews, narratives, days in the life, archetypes, storyboards, user interfaces, live presentations and tons of often painful feedback.
Teams spent 3 weeks getting out of the classroom and iterated and pivoted, put to use the visual and lean tools along with all they learned from Steve Blank’s Udacity lectures, then pulled together enough data and crafted compelling stories for their final Shark-Tank style presentations. They presented to local sharks from four local accelerators—Bizdom, JumpStart, FlashStarts and LaunchHouse (which runs the country’s first kid launched/kid run accelerator for kids, called LightHouse).
Having practiced negotiating terms, students calculated their companies’ valuations, ranging from 50k- 300k, and wrestled with the sharks over equity. Sharks, in turn, argued with one another and even attempted to form syndication in one instance. At the close of the presentations, two teams were invited to apply for funding through local accelerators. The semester concluded with pizza and ice cream.
Pioneers are the Ones With Arrows in Their Backs
Trying to fit an Entrepreneurial Studies course into a college prep high school outside of Silicon Valley is an interesting challenge.
Being a pioneer means that there’s nothing familiar about this for parents, students and our administration. Hawken is exactly the right school to do this, but still our high school students and parents and other teachers are steeped in more traditional classes and subjects, college placement-related pressures, graduation requirements, AP courses, grades, etc.
Creating it feels a lot like building something totally new inside an existing business. But the course was spectacular for its students in ways that no other course is, so we’re getting money and institutional support for growing it. We’re learning a lot as we go…we’re figuring it out.
The Entrepreneurial Studies course serves as a vehicle for the school to realize its mission — forward-focused preparation for the real world through development of character and intellect. The 16 seniors who just completed the first Entrepreneurial Studies course told us that it was different from anything they have ever done in school – all the learning was active and all the work was collaborative and team-oriented. In evaluations they explained the biggest lessons they learned were often about themselves and how they handled failure, their character and their own strengths and weaknesses.
From one senior: “For the first time I am working because I care. Not just for a grade.”
- Students work harder, better and deeper when the stakes are real
- Working for local startups gives them a great way to quickly gain business and life experience alongside customer development experience
- Working for local startups creates real world intensity and urgency in the course
- Kids freak out, get paralyzed and waste time doing so. It’s all part of the learning process
- The learning and growth of how to work well on a team is reason enough for students to enroll in Lean Launch Pad
- We never anticipated the amount of learning that happened here
- Even at a very progressive school, we are breaking new ground and challenging all the traditions and biases of regular school
This June, Hawken School is holding an Educator’s Workshop for middle and high school educators who want to build or grow their own LLP-based programs.
Listen to the post here
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Teams that build continuous customer discovery into their DNA will become smarter than their investors, and build more successful companies.
Awhile back I blogged about Ashwin, one of my ex-students wanted to raise a seed round to build Unmanned Aerial Vehicles (drones) with a Hyper-spectral camera and fly it over farm fields collecting hyper-spectral images. These images, when processed with his company’s proprietary algorithms, would be able to tell farmers how healthy their plants were, whether there were diseases or bugs, whether there was enough fertilizer, and enough water.
(When computers, GPS and measurement meet farming, the category is called “precision agriculture.” I see at least one or two startup teams a year in this space.)
At the time I pointed out to Ashwin that his minimum viable product was actionable data to farmers and not the drone. I suggested that to validate their minimum viable product it would be much cheaper to rent a camera and plane or helicopter, and fly over the farmers field, hand process the data and see if that’s the information farmers would pay for. And that they could do that in a day or two, for a tenth of the money they were looking for.
(Take a quick read of the original post here)
Fast forward a few months and Ashwin and I had coffee to go over what his company Ceres Imaging had learned. I wondered if he was still in the drone business, and if not, what had become the current Minimum Viable Product.
It was one of those great meetings where all I could do was smile: 1) Ashwin and the Ceres team had learned something that was impossible to know from inside their building, 2) they got much smarter than me.
Even though the Ceres Imaging founders initially wanted to build drones, talking to potential customers convinced them that as I predicted, the farmers couldn’t care less how the company acquired the data. But the farmers told them something that they (nor I) had never even considered – crop dusters (fancy word for them are “aerial applicators”) fly over farm fields all the time (to spray pesticides.)
They found that there are ~1,400 of these aerial applicator businesses in the U.S. with ~2,800 planes covering farms in 44 states. Ashwin said their big “aha moment” was when they realized that they could use these crop dusting planes to mount their hyperspectral cameras on. This is a big idea. They didn’t need drones at all.
If you can’t see the video above click here
Local crop dusters meant they could hire existing planes and simply attach their Hyper-spectral camera to any crop dusting plane. This meant that Ceres didn’t need to build an aerial infrastructure – it already existed. All of sudden what was an additional engineering and development effort now became a small, variable cost. As a bonus it meant the 1,400 aerial applicator companies could be a potential distribution channel partner.
The Ceres Imaging Minimum Viable Product was now an imaging system on a cropdusting plane generating data for high value Tree Crops. Their proprietary value proposition wasn’t the plane or camera, but the specialized algorithms to accurately monitor water and fertilizer. Brilliant.
I asked Ashwin how they figured all this out. His reply, “You taught us that there were no facts inside our building. So we’ve learned to live with our customers. We’re now piloting our application with Tree Farmers in California and working with crop specialists at U.C. Davis. We think we have a real business.”
It was a fun coffee.
- Build continuous customer discovery into your company DNA
- An MVP eliminates parts of your business model that create complexity
- Focus on what provides immediate value for Earlyvangelists
- Add complexity (and additional value) later
Listen to the blog post here
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That he which hath no stomach to this fight,
Let him depart; his passport shall be made
William Shakespeare Henry V | Act 4, Scene 3
I recently learned being tough when you select teams for a capstone class pays off for all involved.
Our Lean LaunchPad class requires student teams to get out of the building and talk to 10-15 customers a week while they’re building the product. And they do this while they are talking a full load of other classes. To say it’s a tough class is an understatement. The class is designed for students who said they want a hands-on experience in what it takes to build a startup – not just writing a business plan or listening to lectures.
The class syllabus has all kinds of “black box” warnings about how difficult the class is, the amount of time required, etc.
Yet every year about 20% of teams melt down and/or drop the class because some of the team members weren’t really committed to the class or found they’ve overcommitted.
This year that drop out rate went to zero when I ran an accidental “be a jerk” experiment.
Here Are the Rules
We set up the Lean LaunchPad class so that teams hit the ground running in the first class. Before students are admitted, they formed teams, applied as a team with a business model canvas, had homework and were expected to be presenting their business model canvas hypotheses on day one of the class. Our first class session is definitely not a “meet and greet”. The syllabus is clear that attendance was mandatory for the first class.
This year, at one of the universities where I teach in the engineering school, our quarter was going to start right after the New Year. Some of the teams had students from the business school, law school and education school whose start dates were a few days later.
To remind everyone that attendance at the first class was required, we sent out an email to all the teams in December. We explained why attendance at the first class was essential and reminded them they agreed to be there when they were admitted to the class. The email let them know if they missed the first class, they weren’t going to be allowed to register. And since teams required 4 members, unless their team found a replacement by the first week, the team would not be allowed to register either. (We made broad exceptions for family emergencies, events and a few creative excuses.)
I had assumed everyone had read the syllabus and had planned to be back in time for class.
Then the excuses started rolling in.
Be A Jerk
About 25% of the teams had team members who had purposely planned to miss the first class. Most of the excuses were, “I thought I could make it up later.”
In past years I would have said, “sure.” This year I decided to be a jerk.
I had a hypothesis that showing up for the first class might be a good indicator of commitment when the class got tough later in the quarter. So this time, unless I heard a valid excuse for an absence I said, “too bad, you’ve dropped the class.”
You could hear the screaming around the world (this is in a school where the grading curve goes from A to A+.) The best was an email from a postdoc who said “all his other professors had been accommodating his “flexible” schedule his entire time at the school and he expected I would be as well.“ Others complained that they had paid for plane tickets and it would cost them money to change, etc.
I stuck to my guns – pointing out that they had signed up for the class knowing this was the deal.
Half the students who said they couldn’t make it magically found a way to show up. The others dropped the class.
The results of the experiment? Instead of the typical 20% drop out rate during the quarter none left – 0.
We had a team of committed and passionate students who wanted to be in the class. Everyone else failed the “I’m committed to making this happen” test.
- Commitment is the first step in building a startup team.
- It washes out the others
- Setting a high bar saves a ton of grief later
Listen to the blog post here
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