Filed under: Customer Development, Lean LaunchPad, Teaching | 24 Comments »
Making a Dent in the Universe – Results from the NSF I-Corps
Posted on June 11, 2012 by steveblank
Our goal teaching for the National Science Foundation was to make a dent in the universe. 
Could we actually teach tenured faculty how to turn an idea into a company? And if we did, could it change their lives?
We can now answer these questions.
Hell yes.
———–
The Lean LaunchPad class for the National Science Foundation (NSF)
Over the last 6 months, we’ve been teaching a version of the Lean LaunchPad class for the National Science Foundation Innovation Corps. We’ve taught two cohorts: 21 teams ending in December 2011, and 24 teams ending in May 2012. In July 2012 we’ll teach 50 more teams, and another 50 in October. Each 3-person team consists of a Principal Investigator, an Entrepreneurial Lead and a Mentor.
The Principal Investigator (average age of ~45) is a tenured faculty running their own research lab who has had an active NSF grant within the last 5 years. The Principal Investigator forms the team by selecting one of his graduate students to be the Entrepreneurial Lead.
The Entrepreneurial Lead is a graduate student or post doc (average age ~ 28) who works within the Principal Investigator’s lab. If a commercial venture comes out of the I-Corps, it’s more than likely that the Entrepreneurial Lead will take an active role in the new company. (Typically Principal Investigators stay in their academic role and continue as an advisor to the new venture.)
Mentors (average age ~50) are an experienced entrepreneur located near the academic institution and has experience in transiting technology out of academic labs. Mentors are recommended by the Principal Investigator (who has worked with them in the past) or they may be a member of the NSF I-Corps Mentor network. Some mentors may become an active participant in a startup that comes out of the class.
The NSF I-Corps: Class Goals
The NSF I-Corps Lean LaunchPad class has different goals then the same class taught in a university or incubator. In a university, the Lean LaunchPad class teaches a methodology the students can use for the rest of their careers. In an incubator, the Lean LaunchPad develops angel or venture-funded startups.
Unlike an incubator or university class, the goal of the NSF I-Corps is to teach researchers how to move their technology from an academic lab into the commercial world. A successful outcome is a startup or a patent or technology license to a U.S. company.
(While many government agencies use Technology Readiness Levels to measure a projects technical maturity, there are no standards around Business Maturity Levels. The output of the NSF I-Corps class provides a proxy.)
The NSF I-Corps doesn’t pick winners or losers. It doesn’t replace private capital with government funds. Its goal is to get research the country has already paid for educated to the point where they can attract private capital. (It’s why we teach the class with experienced Venture Capitalists.)
Teaching Objectives
Few of the Principal Investigators or Entrepreneurial Leads had startup experience, and few of the mentors were familiar with Business Model design or Customer Development.
Therefore, the teaching objectives of the I-Corps class are:
1) Help each team understand that a successful company was more than just their technology/invention by introducing all the parts of a business model (customers, channel, get/keep/grow, revenue models, partners, resources, activities and costs.)
2) Get the teams out of the building to test their hypotheses with prospective customers. The teams in the first cohort averaged 80 customer meetings per team; the second cohort spoke to an average of 100.
3) Motivate the teams to pursue commercialization of their idea. The best indicators of their future success were whether they a) found a scalable business model, b) had an interest in starting a company, and c) would pursue additional funding.
Methodology
The National Science Foundation worked with NCIIA to establish a baseline of what the students knew before the class and followed it up with a questionaire after the class.
While my experience in teaching students at Stanford, Berkeley and Columbia told me that this class was an effective way to teach all the parts that make up a startup, would the same approach work with academic researchers?
Here’s what they found.
Results
Teams came into the class knowing little about what parts made up a company business model (customers, channel, get/keep/grow, revenue models, partners, resources, activities and costs.) They left with very deep knowledge.
I-Corps teams spent the class refining their business model and minimum viable product. By the end of the class:
- Over 95% believed that they found a scalable business model.
- 98% felt that they had found “product/market fit”.
The class increased everyones interest in starting a company. 92% said they were going to go out and raise money – either from the NSF or with private capital. (This was a bit astonishing. Given that most of them didn’t know what a startup was coming in. These are new jobs being created.)
One of the unexpected consequences of the class was its effect on the Principal Investigators, (almost all tenured professors.) A surprising number said the ideas for the class will impact their research, and 98% of all of the attendees said it was going to be used in their careers.
Another unexpected result was the impact the class had on the professors own thinking about how they would teach their science and engineering students. We got numerous comments about “I’m going to get my department to teach this.”
What’s Next
The NSF and NCIIA understand that the analysis doesn’t end by just studying the results of each cohort. We need to measure what happens to the teams and each of the team members (Principal Investigator, Entrepreneurial Lead and Mentor) over time. It’s only after a longitudinal study that will take years, can we see how deep of a dent we made in the universe.
But I think we’ve made a start.
Acknowledgements
Thanks to the team at NCIIA that provided the questionaire and analytical data (Angela Shartrand) and the logistical support (Anne Hendrixson) to run these NSF classes.
The National Science Foundation (Errol Arkilic, Babu DasGupta) took a chance at changing the status quo.
Members of Congress on both sides of the aisle who’ve realized cracking the code on how to teach starting companies means a brighter day for the future of all jobs in the United States – not just tech startups.
And thanks to the venture capitalists and entrepreneurs who volunteer their time for their country; Jon Feiber from MDV, John Burke from True Ventures, Jim Hornthal from CMEA, Jerry Engel from Monitor Ventures (and the U.C. Berkeley Haas Business School,) Oren Jacob from ToyTalk and Lisa Forssell of Pixar.
And to our new teaching teams at University of Michigan and Georgia Tech – It’s your turn.
Lessons Learned
- The Lean LaunchPad class (Business Model design+Customer Development+ extreme hands-on) works
- They leave knowing:
- how to search for a business model (customers, channel, get/keep/grow, revenue models, partners, resources, activities and costs,)
- how to find product/market fit, and a scalable business model
- It has the potential to change careers, lives and our country
Filed under: Customer Development, Lean LaunchPad, Teaching | 20 Comments »
Entrepreneurship for the 99%
Posted on June 4, 2012 by steveblank
This is a guest post from Jerry Engel, the Faculty Director of the National Science Foundation Innovation Corps (and the Founding Faculty Director of the Lester Center for Entrepreneurship at UC Berkeley.)
———–
The 99%
As the morning fog burns off the California coast, I am working with Steve Blank, preparing for the Lean LaunchPad Faculty Development Program we are running this August at U.C. Berkeley. This is a 3-day program for entrepreneurship faculty from around the world how to teach entrepreneurship via the Lean LaunchPad approach (business model canvas + customer development) and bring their entrepreneurship curriculums into the 21st century. Over the past couple of years this Lean LaunchPad model has proven immensely effective at Berkeley, Stanford, Columbia and, of course, the National Science Foundations Innovation-Corps program. The data from the classes seem to indicate that we’ve found have a method how to make scalable startups fail less.
While we’re excited by the results, we’ve realized that we’ve been solving the problem for the 1% of new ventures that are technology startups. The reality is that the United States is still a nation of small businesses. 99.7% of the ~6 million companies in the U.S. have less than 500 people and they employ 50% of the 121 million workers getting a paycheck. They accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009. And while they increasingly use technology as a platform and/or a way of reaching and managing customers, most are in non-tech businesses (construction, retail, health care, lodging, food services, etc.)
While we were figuring out how to be incredibly more efficient in building new technology startups, three out out of 10 new small businesses will fail in 2 years, half fail within 5 years. The tools and techniques available to small businesses on Main Street are the same ones that were being used for the last 75 years.
Therefore, our remaining challenges are how to make them fail less – and how can we make the Lean LaunchPad approach relevant to the rest of the 99% of startups.
Serendipity
A serendipitous answer came to us around noon. His name is Alex Lawrence. Alex, vice provost for Innovation & Economic Development at Weber State University in Utah and completing his first year of teaching entrepreneurship. Alex is a successful serial entrepreneur –with the same drive and energy of many we have known here in Silicon Valley, but different. His nine startups have ranged from franchised fruit juice shops to Lendio a financial services company for small businesses. Alex had been recruited back by his Alma Matter to create an entrepreneurship program. In fact he had just been charged with creating an entrepreneurship minor – five or six courses for students of any major at the University that would help prepare them for the challenge of starting their own businesses.
Alex’s first insight was that the traditional “how to write a business plan” was as obsolete for Main Street as it is for Silicon Valley. So he had adopted Steve’s Lean LaunchPad class and was using The Startup Owner’s Manual as his core text. He had contacted us seeking advice on developing his curriculum, and it just seemed natural to invite him out to the ranch for a deeper dive.
As we dug into learning about Alex’s teaching experience we naturally asked him about the ventures his own students were creating. It was clear Alex was a bit apologetic; photo studios, online retail subscriptions to commodity household and personal hygiene products, etc. Alex explained that in his community building a successful venture that generated nice cash flows – not IPO’s – were the big win. To his students these were not “small businesses”, but ‘their businesses’, their livelihoods and their opportunities to create wealth and independence for themselves and their families.
Mismatch for Main Street
As we walked out to the pond, Alex explained that while he found the teachings of the Lean LaunchPad directly applicable and effective, there was a mismatch for his students in the size of the end goal (a great living versus a billion dollar IPO) and the details of the implementation of the business model (franchise and multilevel marketing versus direct sales, profit sharing versus equity for all, family and SBA loans versus venture capital, etc.)
Sitting by the pond we had a second epiphany: we could easily adjust the Lean LaunchPad class to bring 21st century entrepreneurship techniques to ‘Main Street’. To do this we needed to do is change the end goals and implementation details to match the aspirations and realities that these new small businesses face.
We called this Mainstream Entrepreneurship.
Mainstream Entrepreneurship
Mainstream Entrepreneurship recognizes that with the Lean LaunchPad class we now have a methodology of making small businesses fail less. That accelerating business model search and discovery and using guided customer engagement as a learning process, we could help founders of mainstream businesses just like those starting technology ventures.
For the rest of the afternoon, Steve and I brainstormed with Alex about how he could take his 20 years of entrepreneurial small business experience and use the Business Model Canvas and Customer Development to create a university entrepreneurship curriculum and vocabulary for the mainstream of American Business.
We think we got it figured out.
Alex Lawrence will be one of the presenters at the Lean LaunchPad Educators Program August 22-24th in Berkeley.
Lessons Learned
- Small businesses make up 99.7% of U.S. companies
- “How to write a business plan” is as obsolete for Main Street as it is for Silicon Valley
- Using the Lean LaunchPad (the business model canvas and Customer Development) are the right tools
- Small businesses have different end goals and implementation details
- We can adapt/modify the Lean LaunchPad approach to embrace these goals/details
Filed under: Customer Development, Lean LaunchPad, Teaching | 39 Comments »
Five Days to Change the World – The Columbia Lean LaunchPad Class
Posted on April 28, 2012 by steveblank
We’ve taught our Lean LaunchPad entrepreneurship class at Stanford, Berkeley, Columbia and the National Science Foundation in 8 week, 10 week and 12 week versions. We decided to find out what was the Minimum Viable Product for our Lean LaunchPad class.
Could students get value out of a 5-day version of the class?
The Setup
At the invitation of Murray Low at the Entrepreneurship Center in the Columbia Business School, we went to New York to find out. We were going to teach the Lean LaunchPad class in 5-days. I was joined by my Startup Owners Manual co-author Bob Dorf, Alexander Osterwalder (author of Business Model Generation) and Fred Wilson of Union Square Ventures.
As we’ve done in previous classes, the students form teams and come up with an idea before the class.
Potential students watched an on-line video of Osterwalder explaining the Business Model Canvas and then applied for admission to the class with a fully completed business model canvas. Here are two examples:
If you can’t see the presentation above, click here.
If you can’t see the presentation above, click here.
The Class
We had 69 students in 13 teams. Instead of going around the room introducing themselves, each group hit the ground running by presenting their canvas.
The class organization was pretty simple:
- textbooks were The Startup Owners Manual and Business Model Generation
- team presentations 9-12:30 (with continual instructor critiques)
- working lunch 12:30-1:30 (with office hours)
- lecture 1:30-3:00
- get out of the building 3:00-on
- repeat for 5-days
Resources
The 5-day syllabus is here.
All 13 teams Day 1 presentations are here.
Day 2 presentations here.
Day 3 presentations here.
Day 4 presentations here.
Day 5 presentations here.
The Outcome
After 5 days the teams collectively had ~1,200 face-to-face customer interviews, with another 1,000+ potential customers surveyed on-line.
Take a look at the same two teams presentations (compare it to their slides above):
If you can’t see the presentation above, click here.
If you can’t see the presentation above, click here.
Lessons Learned:
- A five day Lean Launchpad Class is definitely worth doing.
- The Business Model Canvas + Customer Development works even in this short amount of time
- However we were in NYC where customer density was high.
- As we’ve already found, this class needs to be taught as a joint engineering/mba class
- Next time we teach we will complete the transition to a flipped classroom:
- Have no lectures during class. We’ll offer video lectures, and use the time for class labs built around detailed analysis of 2 or 3 canvas pivots
- Make teams use Salesforce, or some similar package, to track all contacts/customer calls
Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 17 Comments »
The National Science Foundation Innovation Corps – What America Does Best
Posted on March 26, 2012 by steveblank
We ran the first National Science Foundation Innovation Corps class October to December 2011.
63 scientists and engineers in 21 teams made ~2,000 customer calls in 10 weeks, turning laboratory ideas into formidable startups. 19 of the 21 teams are moving forward in commercializing their technology.
Watching the final presentations it was clear that the results were way past our initial expectations (comments from mentors as well as pre- and post-class survey data suggested that most of the teams learned more in two months than others had in two years.) So much so that the NSF decided to scale the Innovation Corps program.
In 2012 the NSF will put 150 teams of the best scientists in the U.S. through the Lean Launchpad class. And to help teach these many teams, the NSF will recruit other universities that have engineering entrepreneurship programs to become part of the Innovation Corps network.
Congress Gets It
In-between the 2011 pilot class and the first NSF class of 2012, I got a call from Congressman Dan Lipinski. He sits on the House committee that oversees the NSF - the Science, Space and Technology committee (a place where his engineering degree and PhD comes in handy.) He had read my blog posts about the NSF Innovation Corps and was interested in how the first class went. He wanted to fly out to Stanford and sit in the Lean LaunchPad class about to start in the engineering school.
While I’ve had visitors in my classes before, having a congressman was a first. He showed up with no press in-tow, no entourage, just a genuine search for understanding of whether this program was a waste of taxpayer money or good for the country.
He asked tough questions about why the government not private capital should be doing this. I explained that the goal of the Innovation Corps was to bridge what the NSF calls the “ditch of death” – the gap between when NSF research funding runs out and when a team is credible enough (with enough customer and market knowledge) to raise private capital or license/partner with existing companies. The goal was not to replace private capital but to help attract it. The amount of money spent on the Innovation Corps would be about 1/4 of one percent of the $7.373 billion NSF budget, but it would leverage the tens of billions basic research dollars already invested. It’s payoff would be disproportionately large for the country. It’s one of the best investments this country can make for keeping the U.S. competitive and creating jobs.
After class the Congressman joined the teaching team at our favorite pizza place for our weekly post-class debrief.
If you like science, technology or entrepreneurship, this guy is the real deal. He gets it.
“Innovation, jobs and entrepreneurship” have become popular buzzwords in an election year. But it was pretty amazing to see a congressman jump on a plane to actually find out if he can help the country do so. He issued this press release asking Congress to fully fund the Innovation Corps when he came back to Washington.
The National Science Foundation Innovation Corps combines the best of what the U.S. government, American researchers in academia and risk capital can do together. If we’re correct, we can compress the time for commercializing scientific breakthroughs and reduce the early stage risks of these new ventures. This means more jobs, new industries and a permanent edge for innovation in the United States.
———
The 3-person teams consisted of Principal Investigators (PI’s), mostly tenured professors (average age of 45,) whose NSF research the project was based on. The PI’s in turn selected one of their graduate students (average age of 30,) as the entrepreneurial lead. The PI and Entrepreneurial Lead were supported by a mentor (average age of 50,) with industry/startup experience.
This was most definitely not the hoodie and flip-flop crowd.
Part one of the posts on the NSF Innovation Corps is here, part two here. Syllabus for the class is here. Textbook is here.
Here are some of the final Lessons Learned presentations and team videos:
Akara Solutions: Flexible, Low Cost Cooling Technology for LED Lighting
Principal Investigator: Satish Kandlikar Rochester Institute of Technology
If you can’t see the video above, click here.
If you can’t see the presentation above, click here.
Semiconductor-Based Hydrogen and Hydrocarbon Sensors
Principal Investigator: Lisa Porter Carnegie-Mellon University
If you can’t see the video above, click here.
If you can’t see the presentation above, click here.
Pilot Production Of Large Area Uniform Single-Crystal Graphene Films
Principal Investigator: Alan Johnson University of Pennsylvania
If you can’t see the video above, click here.
If you can’t see the presentation above, click here.
Radiotracer Synthesis Commercialization
Principal Investigator: Stephen DiMagno University of Nebraska-Lincoln
If you can’t see the video above click here.
If you can’t see the presentation above, click here.
Commercialization of an Engineered Pyrolysis Blanket for the Conversion of Forestry Residues to Soil Amendments and Energy Products
Principal Investigator: Daniel Schwartz University of Washington
If you can’t see the video above, click here
If you can’t see the presentation above, click here.
Photocatalysts for water remediation
Principal Investigator: Pelagia Gouma SUNY at Stony Brook
If you can’t see the video above, click here.
If you can’t see the presentation above, click here.
The other teams were equally interesting. Here are links to their Lessons Learned presentations.
IDecideFast – A web-based application for effective decision making for the layperson
Principal Investigator: Ali Abbas University of Illinois at Urbana-Champaign
Silicon Terahertz Electronics
Principal Investigator: Michael Shur Rensselaer Polytechnic Institute
Standoff detection of explosives using novel signal-amplifying nanocomposite and hand-held UV light
Principal Investigator: Yu Lei University of Connecticut
MEMS-based drug infusion pumps
Principal Investigator: Ellis Meng University of Southern California
TexCone – Laser-Generated Surface Textures for Anti-Icing and Sun-Light-Trapping Applications
Principal Investigator: Mool Gupta University of Virginia
Concentric Technology
Principal Investigator: Walter Besio University of Rhode Island
Hand-Held Tonometer for Transpalpebral Intraocular Pressure Measurement
Principal Investigator: Eniko Enikov University of Arizona
Artificial Membrane-based Ion Channel Screening
Principal Investigator: Jacob Schmidt University of California-Los Angeles
Privacy-Preserving Location Based Services
Principal Investigator: Nan Zhang George Washington University
MySkinTone: A breakthrough technology and product for skin melanin evaluation
Principal Investigator: Michael Silevitch Northeastern University
Mobidemics: Using Mobile Gaming for Healthcare
Principal Investigator: Nilanjan Banerjee University of Arkansas
SmartMenu
Principal Investigator: Elizabeth Mynatt (mynatt@cc.gatech.edu); Georgia Tech Research Corporation
Sweet Sensors – Portable sensors using widely available personal glucose monitor
Principal Investigator: Yi Lu University of Illinois at Urbana-Champaign
SwiftVax – A Green Manufacturing Platform for Faster, Cheaper, and Scalable Vaccine Manufacturing
Principal Investigator: Karen McDonald University of California-Davis
Lessons Learned
- Yes, entrepreneurship can be taught
- No, there’s no age limit
- We now know how to reduce customer and market risk for new ventures
- The combination of government, researchers in academia and risk capital make a powerful accelerator for technology commercialization
- There’s at least one congressman who understands it
Filed under: Customer Development, Lean LaunchPad, Teaching, Technology | 13 Comments »
Stanford 2012 Lean LaunchPad Presentations – part 2 of 2
Posted on March 14, 2012 by steveblank
Today, the second half of the Stanford Engineering Lean LaunchPad Class gave their final presentations. Here are the final four (the first five are here.)
Team ParkPoint Capital
This team spoke face-to-face with 326 customers. As often happens, this team came into class convinced that their market research proved that their business was providing credit to underbanked customers. 8 weeks later they ended up as a financial service provider for immigrants. Lots of learning and pivots on the way.
If you can’t see the slide presentation above, click here.
The ParkPoint Capital customer discovery narrative blog is here.
We thought the team summarized their lessons learned well:
If you can’t see the image above, click here.
Team DentalOptics
Team DentalOptics spoke face-to-face with 72 customers. Their journey was from a lighting solution for dentists to an automated way to test for periodontal disease. How they got to their destination was truly amazing.
If you can’t see the slide presentation above, click here.
The DentalOptics customer discovery narrative blog is here.
Team MiCasa
They spoke to 105 customers and surveyed 98 more.
You can watch as this team pivots through Customer Segments by clicking through their business model canvases at the end of presentation. It is the first film-strip of entrepreneurship in action.
If you can’t see the slide presentation above, click here.
The MiCasa customer discovery narrative blog is here
Team ZiiLion
Interviewed 154 customers in China plus surveyed another 48.
This team was trying to do something extremely difficult. Create an app for Renren (a Chinese version of Facebook) for event planning. And do it while in school in the U.S. Lots of learning and Pivots here.
If you can’t see the slide presentation above, click here.
The Ziilion customer discovery narrative blog is here.
———
Congratulations to all the teams. They taught us a lot.
Stanford e245 2012 class photo
Next week the Lean LaunchPad class will be taught to 25 teams for the National Science Foundation Innovation Corps. And later in the week we’ll be sharing what we learned with other entrepreneurial educators it at the NCIIA conference. Then in April we’ll be teaching Corporate Entrepreneurship at Columbia University.
Lessons Learned
- Class is a mix of engineering students and MBA’s
- Students apply as preformed teams
- Application to the class is the teams business model canvas
- Curriculum = business model canvas + customer development
- Minimal lecture, maximum experiential immersion
- Relentless customer visits (10-20 a week)
- On-line journal to document their customer discovery narrative
- One mentor (VC or experienced entrepreneur) per team
- Mandatory office hours
- Weekly in-class presentations for all teams
- Weekly critiques of team customer discovery progress
- Workshop on how to present a story-arc and narrative
- Lean LaunchPad teaching guide
Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 2 Comments »
Stanford 2012 Lean LaunchPad Presentations – part 1 of 2
Posted on March 7, 2012 by steveblank
Today, the first half of the Stanford Engineering Lean LaunchPad Class gave their final presentations. Here are the first five. (Part two is here.)
It Feels Like 20 Years Ago Today
It’s hard to believe it’s only been a year since we taught the first 10 teams in the Stanford Lean LaunchPad class. To share what we learned, we blogged each of those class sessions, (all the slides can be found here.) Since then we’ve taught an additional 50 Lean LaunchPad teams: 21 teams for the National Science Foundation (NSF) Innovation Corps, 11 teams for a joint Berkeley/Columbia MBA class, another 9 for a Berkeley MBA/Engineering class, and now 9 more teams in this Stanford Engineering Lean LaunchPad Class class.
Later this month, the next 25 National Science Foundation Innovation Corps teams will show up – but this time with reinforcements. The NSF has selected the best entrepreneurship teaching teams from two major universities and they will be joining the class. The goal is for them is to observe this class, then host and teach the next round of 50 NSF Innovation Corps scientist/engineer teams in July. The process will repeat itself, quarter by quarter – new students, new University entrepreneurship teaching teams.
We’ll teach over 175 NSF Innovation Corps teams in the Lean LaunchPad course in 2012. While at the same time spreading the Lean LaunchPad entrepreneurship curriculum to campuses across the United States.
The 2012 Stanford Lean LaunchPad Presentations
The class is intensely and deliberately experiential to develop the mindset, reflexes, agility and resilience an entrepreneur needs to search for certainty in a chaotic world. Students were going to get a hands-on experience in how to start a new company. The premise of the class is that startups, are not about executing a plan where the product, customers, channel are known. Startups are in fact only temporary organizations, organized to search–not execute–for a scalable and repeatable business model.
Yet this isn’t an incubator. We trying to teach students a methodology that combines customer development, agile development, business models and pivots. (The slides and syllabus here describe the details of the class.) Our goal is to teach them the art, science and strategy of entrepreneurship that will forever change how they view early stage ventures.
And do it in 8 weeks.
Team EngineKites
A kite-boarding startup? Only in California! This team spoke face-to-face with 50+ end users, 3 manufacturers, 25 potential partners, 22 domain experts and surveyed an additional 115 customers. And they got to the beach a lot. Don’t miss their video of the product below.
If you can’t see the slide presentation above, click here.
If you can’t see the video above, click here
The EngineKites customer discovery narrative blog is here.
Team Sync
Team Sync spoke face-to-face with 74 customers, 10 experts and surveyed another 103 customers.
If you can’t see the slide presentation above, click here.
The Sync customer discovery narrative blog is here.
Team Nudge/Dynamo
This team won the award for the most pivots in the class. They had face-to-face interviews with 252 customers + 10 partner interviews + 76 surveyed.
Loved the “evolution” slide.
If you can’t see the slide presentation above, click here.
The Nudge/Dyanmo customer discovery narrative blog is here
Team GameSpeed
These guys hold the record for the number of customers touched 4,000! 147 face-to-face or phone interviews.
If you can’t see the slide presentation above, click here.
The GameSpeed customer discovery narrative blog is here.
Team ColorWheels
This team was trying to solve a hard problem – getting girls engaged in science and engineering. They spoke to 294 people: 69 parents, 110 kids, 6 high school girls 32 experts, 6 manufacturers, and surveyed an addtional 68 parents.
If you can’t see the presentation above, click here.
The ColorWheels customer discovery narrative blog is here.
We Got Smarter Too
One of the great things about the class is that the curriculum is evolving as fast as the teams are learning. As a teaching team we’ve learned a ton of how to best select teams, so we now insist that they come in as preformed teams. We hold mixers a month or two in advance to help facilitate the process. It has made a dramatic difference in team efficiency and cohesion.
We have the students formally apply for the class by filling out a business model canvas. And at the first class they introduce themselves and their teams by presenting the canvas. This moved the learning up by one entire class session since we can now hit the ground running.
Given how important the students work in customer discovery outside the building was, we made each team keep an online journal on each step of their progress. Since the teaching team read each of their narrative before class and office hours, it made their in-class presentations short and efficient.
We realized that students needed help turning all that they were learning from customers into a coherent and crisp presentation. So we offered a special evening workshop on how to present a story-arc and narrative.
We’ve been experimenting in other ways – trying to figure out how to “bubble-up” some of the customer discovery data onto the canvas with red/yellow/green dots you see on some of the business model canvas slides. We suggested that teams talk about their hypothesis tests, draw diagrams of product flows through the channel and let us know who the customer segment is with a “customer archetype” slide.
We’re about to move our class text to The Startup Owners Manual and put together a draft of a standard Lean LaunchPad teaching guide.
Finally, we’ve been paring the lectures back to the absolute minimum to impart the information necessary for the teams to move forward, but leaving more time for us to provide feedback and critique of their weekly presentations. We’re actively considering running an experiment of making the lectures an on-line homework requirement (with on-line quizzes to make sure they view the material.)
None of this would be possible without the two VC’s who volunteer their time to teach this Stanford class with me: Jon Feiber of Mohr Davidow Ventures and Ann Miura-ko of Floodgate,
And we had the help of Lisa Forssell, director of technical artists from Pixar, who taught the “how to present class” and Thomas Haymore our indefatigable Teaching Assistant and our team of mentors.
And hats off to Kathy Eisenhardt and Tom Byers of the Stanford Technology Ventures Program who gave us the freedom to invent and teach the class.
—–
The rest of the teams present next week. We’ll post their slides in part 2.
Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 10 Comments »
Search versus Execute
Posted on March 5, 2012 by steveblank
One of the confusing things to entrepreneurs, investors and educators is the relationship between customer development and business model design and business planning and execution.
When does a new venture focus on customer development and business models? And when do business planning and execution come into play?
Here’s an attempt to put this all in context.
Don’t Throw the Tomatoes
I was in Washington D.C. last week presenting at the ARPA-E conference. I spent the next day working with the National Science Foundation on the Innovation Corps, and talking to congressional staffs about how entrepreneurial educational programs can reshape our economy. (And I even found time to go to the Spy Museum.)
One of the issues that came up is whether the new lexicon of entrepreneurial ideas – Customer Development, Business Model Design, Lean, Lean LaunchPad class, etc. – replace all the tools and classes that are currently being taught in entrepreneurship curriculums and business schools. I was a bit surprised since most of what I’ve been advocating is complementary to existing courses. However, I realize I’ve primarily written about business model design and customer development. Given that I’m speaking this month in front of entrepreneurship educators at the NCIIA conference, I thought I should put it in context before they throw tomatoes at me.
Search Versus Execution
One of the things startups have lacked is a definition of who they were. For years we’ve treated startups like they are just smaller versions of a large company. However, we now know that a startup is a temporary organization designed to search for a repeatable and scalable business model. Within this definition, a startup can be a new venture or it can be a new division or business unit in an existing company.
If your business model is unknown – that is just a set of untested hypotheses- you are a startup searching for a repeatable business model. Once your business model (market, customers, features, channels, pricing, Get/Keep/Grow strategy, etc.) is known, you will be executing it. Search versus execution is what differentiates a new venture from an existing business unit.
Strategy
The primary objective of a startup is to validate its business model hypotheses (and iterate and pivot until it does.) Then it moves into execution mode. It’s at this point the business needs an operating plan, financial forecasts and other well-understood management tools.
Process
The processes used to organize and implement the search for the business model are Customer Development and Agile Development. A search for a business model can be in any new business – in a brand new startup new or in a new division of an existing company.
In search, you want a process designed to be dynamic, so you work with a rough business model description knowing it will change. The model changes because startups use customer development to run experiments to test the hypotheses that make up the model. And most of the time these experiments fail. Search embraces failure as a natural part of the startup process. Unlike existing companies that fire executives when they fail to match a plan, we keep the founders and change the model.
Once a company has found a business model (it knows its market, customers, product/service, channel, pricing, etc.), the organization moves from search to execution.
The product execution process – managing the lifecycle of existing products and the launch of follow-on products – is the job of the product management and engineering organizations. It results in a linear process where you make a plan and refine it into detail. The more granularity you add to a plan, the better people can execute it: a Business Requirement document (BRD) leads to a Market Requirements Document (MRD) and then gets handed off to engineering as a Functional Specifications Document (FSD) implemented via Agile or Waterfall development.
Organization
Searching for a business model requires a different organization than the one used to execute a plan. Searching requires the company to be organized around a customer development team led by the founders. In contrast, execution, (which follows search) requires the company to be organized by function (product management, sales, marketing, business development, etc.)
Companies in execution suffer from a “fear of failure culture“, (quite understandable since they were hired to execute a known job spec.) Startups with Customer Development Teams have a “learning and discovery” culture for search. The fear of making a move before the last detail is nailed down is one of the biggest problems existing companies have when they need to learn how to search.
The idea of not having a functional organization until the organization has found a proven business model is one of the hardest things for new startups to grasp. There are no sales, marketing or business development departments when you are searching for a business model. If you’ve organized your startup with those departments, you are not really doing customer development. (It’s like trying to implement a startup using Waterfall engineering.)
Education
Entrepreneurship curriculums are only a few decades old. First taught as electives and now part of core business school curriculums, the field is still struggling to escape from the bounds of the business plan-centric view that startups are “smaller versions of a large company.” VC’s who’ve watched as no startup business plan survived first contact with customers continue to insist that startups write business plans as the price of entry to venture funding. Even as many of the best VCs understand that the business ‘planning’ and not the ‘plan’ itself, are what is important.
The trouble is that over time – this key message has gotten lost. As business school professors, many of whom lack venture experience, studied how VCs made decisions, they observed the apparently central role of the business plan and proceeded to make the plan [not the planning], the central framework for teaching entrepreneurship. As new generations of VCs with MBA’s came into the business, they compounded the problem (“that’s how we always done it” or “that’s what I learned (or the senior partners learned) in business school.”)
Entrepreneurship educators have realized that plan-centric curriculum may get by for teaching incremental innovation but they’re not turning out students prepared for the realities of building new ventures. Educators are now beginning to build their own E-School curriculum with a new class of management tools built around “search and discovery.” Business Model Design, Product/Service Development, Customer Development, Startup Team-Building, Entrepreneurial Finance, Marketing, Founder Transition, etc. all provide the startup equivalent of the management tools MBAs learn for execution.
Instructional Strategy
Entrepreneurial education is also changing the focus of the class experience from case method to hands-on experience. Invented at Harvard, the case method approach assumes that knowledge is gained when students actively participate in a discussion of a situation that may be faced by decision makers.
The search for a repeatable business model for a new product or service is not a predictable pattern. An entrepreneur must start with the belief that all her assumptions are simply hypotheses that will undoubtedly be challenged by what she learns from customers. Analyzing a case in the classroom removed from the realities of chaos and conflicting customer responses adds little to an entrepreneur’s knowledge. Cases can’t be replicated because the world of a startup too chaotic and complicated. The case method is the antithesis of how entrepreneurs build startups – it teaches pattern recognition tools for the wrong patterns – and therefore has limited value as an entrepreneurship teaching tool.
The replacement for cases are not better cases written for startups. Instead, it would be business model design – using the business model canvas as a way to 1) capture and visualize the evolution of business learning in a company, and 2) see what patterns match real world iterations and pivots. It is a tool that better matches the real-world search for the business model.
An entrepreneurial curriculum obviously will have some core classes based on theory, lecture and mentorship. There’s embarrassing little research on entrepreneurship education and outcomes, but we do know that students learn best when they can connect with the material in a hands-on way – personally making the mistakes and learning from them directly.
As much as possible the emphasis ought to be on experiential, learner-centric and inquiry-based classes that help to develop the mindset, reflexes, agility and resilience an entrepreneur needs to search for certainty in a chaotic world.
Lessons Learned
- The search for the business model is the front end of the startup process
- This is true in the smallest startup or largest company
- The goal is to find a repeatable/scalable model, and then execute
- Execution requires operating plans and financial forecasts
- Customer and Agile Development are the processes to search and build the model
- Product management is the process for executing the model
- Entrepreneurial education needs to develop its own management stack
- Starting with how to design and search for a business model
- Adding all the other skills startups needs
- The case-method is the antitheses of an entrepreneurial teaching method
Filed under: Big Companies versus Startups: Durant versus Sloan, Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 26 Comments »
Who Dares Wins – The 2nd Annual International Business Model Competition
Posted on February 16, 2012 by steveblank
Alexander Osterwalder and I spent last week in Salt Lake City, Utah as judges at the 2nd Annual International Business Model Competition, hosted by Professor Nathan Furr, and his team at the BYU Center for Entrepreneurship.
The idea of a Business Model competition first emerged when I realized that Business Plan writing ought to be taught in English Departments – as they’re the best example of creative writing entrepreneurs will ever do.
The Business Plan
- a roadmap for execution
When venture capital teamed up with technology entrepreneurs in the 1960’s they brought with them the canonical MBA planning tool – the business plan.
The business plan is a wonderful document for organizing and planning for existing companies to launch follow-on products. In an existing corporation, the business plan is the execution document for sustaining innovation.
The problem is that once a plan is written it’s static and assumes minimal new learning. This makes sense in a company where your customers, channel and competition are known. And your revenue plan is something more than a hallucination. But for startups, business plans fail to match the chaotic reality they encounter in the real world. Yet year after year, decade after decade, VC’s would watch as no startup business plan survived first contact with customers. So what did the venture industry do? They kept insisting startups write business plans as the price of entry to venture funding.
Why?
VC’s thought of startups as smaller versions of large companies. Large companies wrote business plans, so VC’s made startups write business plans. Large companies had VP’s of Sales and Marketing, so VC’s made startups organize that way as well. Large companies executed plans well and when they didn’t work, they fired the executives who screwed up. So VC’s assumed that startups should equally unfold per the plan – firing executives when reality intruded.
The reality is that startups needed a new class of management tools. Tools to help them manage the search for a repeatable and scalable business model. Startups needed tools to help them organize their hypotheses, and then needed a process to rapidly test those hypotheses. And they needed tools that recognized that most startups go from failure to failure as they searched for, and discovered, product/market fit. And that instead of firing executives to match a plan, it was the plan itself that needed to rapidly iterate.
Business Plan vs. Business Model + Customer Development
The term business model first appeared ~50 years ago, but the concept didn’t catch on until the 1990’s. It wasn’t until 2010 when Alexander Osterwalder published his book Business Model Generation that it became clear that this was the tool to organize startup hypotheses.
It wasn’t long before Alexander and I realized that organizing hypotheses with his canvas was just the first step in building a business. The next step was getting out of the building and testing the business model in a formal process – and that process is Customer Development.
We’ve blogged about the combined methodologies here and here. Our Lean LaunchPad class at Stanford, Berkeley, Columbia and the National Science Foundation teach the combined Business Model Canvas + Customer Development tools. My new book, The Startup Owners Manual integrates the two.
Three years ago, after watching my nth business plan competition I realized this was simply wrong. Rather than having students invest months writing a 100-page tome and polishing slides that taught them almost nothing about what it was really like to build a company, I thought there had to be a better way.
I suggested that we hold competitions that actually emulated the real world (rather than what’s easy to grade) and 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 development stack.
You can write a business plan slide deck in your dorm or library. But you can’t fake a business model/customer development presentation. It takes a ton of face-face customer interactions.
The International Business Model Competition
From the seed of this initial idea Professor Nathan Furr at BYU did the hard work and created a global business model competition, this year receiving over 100 submissions. The finals were held in the packed 1,000 seat BYU auditorium with lines of students outside unable to get in.
(I love walking around the BYU campus. It feels like being at a giant Eagle Scout convention.)
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.
All of the Business Model finalists were pretty amazing. Each one of these presentations moved the teams closer to building a real company.
This years winner were:
1. XoomPark, BYU
The XoomPark team spoke to over 300 people (customers and channel partners,) ended up with 2 partners, 30 parking lot customers, a working website and a validated revenue model.
If you can’t see the slide deck above, click here.
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3. AutoBid, BYU
AutoBid’s pivots were pure artistry.
If you can’t see the slide deck above, click here.
4. FlexLeg, BYU
FlexLeg got to experience first-hand the complexity of a multi-sided market – something the Business Model Canvas illustrates with startling clarity.
If you can’t see the slide deck above, click here.
Business Plan competitions are for those want to write PowerPoint slides. Business Model competitions are for entrepreneurs who want to learn how to build companies. Harvard will be hosting the 2013 International Business Model Competition and Stanford in 2014.
Come join us.
Lessons Learned
- Business Plan competitions offer VC’s a PowerPoint beauty contest.
- They teach entrepreneurs little about how to build a company.
- You can’t fake a Business Model/Customer Development presentation.
- It tough, grueling and relentless, requiring a ton of face-face customer interactions.
- It what winners do.
Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad | 12 Comments »
Two Giant Steps Forward For Entrepreneurs
Posted on February 9, 2012 by steveblank
While entrepreneurship is in the news fairly regularly, I seldom make news myself. Today, however there are two important updates for entrepreneurs everywhere. Let me be brief…
The “Startup Owner’s Manual” goes On Press Tuesday 2/14
Two years in the making and literally ten years in development, I’m proud to announce that my new book, The Startup Owners Manual, goes onto the printing press next Tuesday. This 608-page work is, as its subtitle says, “the step-by-step guide for building a great company.” It’s the result of a decade of me learning from 1,000′s of entrepreneurs, corporate partners, students and scientists the best practices of what wins in startups. I’ve spent the last two years cramming knowledge into this new book.
In brief, the The Startup Owners Manual is far more detailed and more readable than Four Steps to the Epiphany, (most of the sentences are even finished!). In fact, you could say that all that remains from my last book are the four steps of Customer Development. Briefly, the new book:
- Integrates Alexander Osterwalders “Business Model Canvas” as the front-end and “scorecard” for the customer discovery process.
- Provides separate paths and advice for web/mobile products versus physical products
- Offers a ton of detail and great tips on how to get, keep, and grow customers, recognizing that this happens very differently between web and physical channels.
- and finally it teaches a “new math” for startups: “metrics that matter.”
While MBA’s have had a stack of texts to help them “execute” a business model, this book joins the growing library of books for practitioners for the “search” for the business model.
The Lean LaunchPad Online Class
My online Lean LaunchPad class has created a lot of buzz this week. As you may have heard, I was deep into the production of the lectures when I realized I was producing the wrong class. The online class was originally based on my book The Four Steps to the Epiphany.
Only when I held the draft of my latest book, The Startup Owners Manual, in my hands, did it dawn on me that my online students deserved all the latest best practices of entrepreneurship and Customer Development. Not the stuff I taught a decade ago, but all that I’ve learned teaching the Lean LaunchPad in front of students at Stanford, Berkeley, Columbia and the National Science Foundation in the last year. And I particularly wanted to incorporate everything I’ve spent two years integrating into The Startup Owners Manual into the class.
So apologies to all of you who were expecting the class this month. I hope to get the updated version online in the next 60 days. I’ll keep you updated on this blog as we record our lectures.
In the meantime, if you want to prepare for the class…or get a jump on your startup competition, you can start reading the “recommended text” for the online class right now by ordering my new book. It is recommended—not required—reading for the free online course, and I believe it will be immensely helpful to the startup community at large.
Lessons Learned
- Startups search for business models, exisitng companies execute them
- There are tons of texts about execution, but a paucity of practical ones for founders on how to search
- The Startup Owners Manual is the definitive reference book for founders, investors and everyone interested in startups
- The Lean Launchpad on-line class will be based on the new book
Filed under: Big Companies versus Startups: Durant versus Sloan, Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 88 Comments »
The National Science Foundation Innovation Corps – Class 2: The Business Model Canvas
Posted on December 22, 2011 by steveblank
The Lean LaunchPad class for the National Science Foundation Innovation Corps is a new model of teaching startup entrepreneurship. This post is part two. Part one is here. Syllabus here.
The 21 NSF teams had been out of the classroom for just 15 hours as they filed back in with their business model canvas presentations. Their assignment appeared (to them) to be deceptively simple:
- Write down their initial hypotheses for the 9 components of their company’s business model (who are the customers? what’s the product? what distribution channel? etc.)
- Come up with ways to test each of the 9 business model canvas hypotheses
- Decide what constitutes a pass/fail signal for the test. At what point would you say that your hypotheses wasn’t even close to correct?
- Consider if their business worth pursuing? (Give us an estimate of market size)
- Start their team’s blog/wiki/journal to record their progress during for the class
Teaching logistics
Each week every team presented a 5-minute summary of what they had done and what they learned that week. As each team presented, the teaching team would ask questions and give suggestions (at times direct, blunt and pointed) for things the students missed or might want to consider next week.
While the last sentence is short, it’s one of the key elements that made the class effective. Between the three of us on the teaching team there was 75 years of entrepreneurial experience. (The 2 VC’s between them probably have seen 1000′s of presentations.) While there’s no guarantee our comments were correct or we had any unique insight, we did have enough data for pattern recognition.
The instructors sat in the back of the room and used a shared Google spreadsheet for grading. We graded the teams on a scale of 1-10 and each of us left detailed comments the other teaching team members could share and comment on. Week after week it gave us a pretty detailed record of the progress and trajectory of each team.
(As great as the presentations may be, sitting through 21 of them in a row were exhausting. After this first cohort, the NSF will be putting 25 teams at a time in a class. We intend to break the group into three parallel presentation sections.)
All teams kept a blog – almost like a diary – to record everything they did outside the building. This let the teaching team keep tabs on their progress and offer advice in-between class sessions.
Getting the teams to blog required constant “encouragement,” but it was invaluable. First, as we had a window into each teams engagement with customers, it eliminated most of the surprises when they came into class to present. Second, the blog helped us see if they were gaining insight from their customer discovery. Insight is what enables entrepreneurs to iterate and pivot their business model. The goal wasn’t just to talk to lots of people – the goal was to learn from them. Finally, their blogs gave us and them a permanent record of who they talked to. Over time this contextual contact list will be turned into a shared contact database for all future NSF teams.
The 21 Teams Present
The first team up was Arka Lighting. We liked these guys, but for a while no one on the teaching team could figure out what their core technology was. We knew they wanted to make LED lights that had better performance because they would dissipate less heat. Finally when we understood that their core technology was heat pipes, it wasn’t clear why that made them a better LED supplier. Were they selling to end users? OEMs? Manufacturers? We suggested that perhaps they had jumped to too many assumptions.
If you can’t see the slide deck above, click here
Next up was SenSevere – solid-state hydrogen and hydrocarbon sensors for use in severe environments. They were going to start with the $81M Chlorine market where they already had a partner. It seemed like a tiny business. Did they just want to become a licenser of technology? Were their other severe environments that their sensors fit into? Did customers just want the sensors or a more complete sensing solution?
If you can’t see the slide deck above, click here
Graphene Frontiers was next. Graphene is incredibly cool. It’s touted as the new “wonder material” and its inventors won the 2010 Nobel Prize in Physics. The team wanted to make wafer-scale Graphene films. And do it at ambient pressure. But their proposed products seemed like research lab selling other research labs low volume products. It seemed liked technology in search of a business. Reading the Graphene Frontiers blog for the first week, we realized that in a burst of enthusiasm they set up a Google AdWords campaign to drive traffic to their site!
If you can’t see the slide deck above, click here
Ground Flour Pharma was going to take Fluorine-18 and make a new generation of fluorodeoxyglucose (FDG) radiotracers for Positron emission tomography scanners. But it wasn’t clear who benefits enough to make this a business. If they need FDA trials is it worth the money needed for approval? Is this just a technology license or is it a company?
If you can’t see the slide deck above, click here
C6 Systems had a great set of photos with things on fire in the woods. It seemed like they were going to burn downed trees to do what? Make charcoal? It looked like fun but is this a hobby or a scalable business? Is their any patentable Intellectual Property? What was their Value Chain? Their blog showed a good head-start on talking to customers.
If you can’t see the slide deck above, click here
Photocatalyst made nanogrids that became miniaturized self-supported mats, similar to fishing nets, that float on water and rapidly decompose crude oil using sunlight. The result is that pollutants are turned into water, carbon dioxide and other biodegradable organics for environmental remediation. Their slides sounded like a technical presentation of nanocatalyst features but their blog showed that they had been actively talking to customers in the last two days.
If you can’t see the slide deck above, click here
After the teams presented it was the turn of the teaching team. We presented our second lecture, this time on “Value Proposition.”
If you can’t see the slide deck above, click here
For tomorrow, the teams had 15-hours to get out of the building and talk to 10-15 customers and test their Value Proposition.
While most of the teams got on the phone or into their cars, a couple of others complained, “You didn’t tell us we were supposed to use our spare time to talk to customers. We thought this was just spare time.”
At first, I thought they were joking. Spare time? I don’t think you understand the key principle in a startup – there is no such thing as spare time. The clock is running and you’re burning cash.
Go!
Filed under: Lean LaunchPad, Teaching | 15 Comments »
The Government Starts an Incubator: The National Science Foundation Innovation Corps
Posted on December 20, 2011 by steveblank
Over the last two months the U.S. government has been running one of the most audacious experiments in entrepreneurship since World War II.
They launched an incubator for the top scientists and engineers in the U.S.
This week we saw the results.
63 scientists and engineers in 21 teams made 2,000 customer calls in 8 weeks, turning laboratory ideas into formidable startups. 19 of the 21 teams are moving forward in commercializing their technology.
It was an extraordinary effort.
Your Country Needs You
In July I got a call from Errol Arkilic, a program manager at the National Science Foundation (NSF), the $6.8-billion U.S. government agency that supports research in all the non-medical fields of science and engineering. “We’ve been reading your blog about your Lean Launchpad class.” Wow, that’s nice, I thought, a call from a fan. No, the conversation was about to get more interesting.
“Our country needs you.” Say what? “Part of the NSF charter is to commercialize the best of the science and engineering research we fund. We want to make a bet that your Lean Launchpad class can apply the scientific method to market-opportunity identification. We think your class can train scientists to start companies better than how we’re doing it now.” Uh oh, where’s this heading? “We want to select the best of our researchers, pay them $50,000 to take your class and see if we can change the outcome of their careers and their research.”
“That’s great, maybe I can set up a class for you next year,” I replied. The answer shot back, “We want the class to start in 90 days,”
I remember thinking, “Wow, whoever’s on the other end of phone sounds just like an entrepreneur, they were asking for the impossible.” Just as I was computing whether this was possible, he added, “And we want to bring 25 new teams every quarter.”
So of course, I said yes.
While they’ll never admit it, the National Science Foundation was starting an incubator – the Innovation Corps – to take the most promising research projects in American university laboratories and turn them into startups.
The Innovation Corps – Using the Lean LaunchPad as an Incubator for Scientists and Engineers
The Innovation Corps Startup Team
These weren’t 22-year olds who wanted to build a social shopping web site. Each of the teams selected by the NSF had a Principal Investigator – a research scientist who was a University professor; an Entrepreneurial Lead – a graduate student working in the Investigator’s lab; and a mentor from their local area who had business and/or domain expertise. And they were hard at work at some real science.
The I-Corps Incubator Program
Unlike other incubators, our Lean LaunchPad Class had a specific curriculum. We taught them the business model / customer development / agile development solution stack. This methodology forces rapid hypothesis testing and Customer Development by getting out of the building while building the product. (The mentors in our program are there to support the methodology, but aren’t there to tell stories.)
The gamble was that we could train Professors doing hard-core science, who had never been near a startup or Silicon Valley, to get out of the building and talk to customers and Pivot as easily as someone at a web startup.
The Scientists, the NSF and the teaching team were all going to go where no one had before.
Given that Silicon Valley had started with scientists and engineers not MBA’s, I thought this was a bet worth making.
The Curriculum
Since the teams were in Universities scattered across the U.S., we couldn’t keep them in Silicon Valley for all 8 weeks, so we tried an experiment in teaching remotely.
First, we brought all 21 teams to Stanford for 3-days of 10 hour-a-day classes in business model design and customer development. After returning to their schools, they got out of their labs while they built their products. Once a week, via Webex,they presented their Customer Development progress on line to the teaching team and the other teams. Then it was our turn, and we lectured all the teams remotely. After 7 weeks they returned to Silicon Valley for their final presentations.
(The class syllabus is here. The class textbooks were “The Four Steps to the Epiphany and Business Model Generation.”)
Assembling the Teaching Team
We recruited two veteran Venture Capital partners to be part of the 10-week teaching team: Jon Feiber, at Mohr Davidow and John Burke of True Ventures. Alexander Osterwalder joined us for the opening day, and Oren Jacob, ex-CTO of Pixar joined us for a finale.
The First Class
As the first class settled into their seats at Stanford I wondered if we were going to be able to get them to act like startups. Most of the Principal Investigators were professors. Some had their own labs managing large groups of researchers. Their average age was in the mid-40’s. Their mentors were at least that old. Only the Entrepreneurial Leads (the PI’s assistants) were in their mid to late 20’s.
Looking at them I wondered if: 1) hard-core science and engineering projects could rapidly pivot, 2) if the Principal Investigators would simply “assign” the work to their graduate students. I thought about the common wisdom that only 20-year olds doing Internet startups could be agile. Some incubators would have labeled this group too old to be entrepreneurs. I smiled as I realized that I was older than most (but not all) of them.
The Stanford Lectures
Our first lecture was about 1) how to organize their thinking of what it takes to build a startup – the business model canvas and 2) how to test their hypotheses – the Customer Development Process.
Since the first part of the lecture was about Alexander Osterwalder’s Business Model Canvas, Osterwalder flew in from Switzerland to teach slides 20-76. And since the rest of the slides were about Customer Development, I taught those.
If you can’t see the slide deck above, click here.
The homework for the 21 teams in the next 24-hours? Come up with a business model canvas for their startup. And tell us how they will test each of their business model hypotheses.
As day one ended, I wondered what those canvases would look like.
Stay tuned for Part 2.
Filed under: Lean LaunchPad, Teaching | 27 Comments »
The Startup Team
Posted on December 13, 2011 by steveblank
Individuals play the game, but teams beat the odds
SEAL Team saying
Over the last 40 years Technology investors have learned that the success of startups are not just about the technology but “it’s about the team.”
We spent a year screwing it up in our Lean LaunchPad classes until we figured out it was about having the right team.
Startup Team Lessons Learned
During the last 12 months we’ve taught 42 entrepreneurial teams with 147 students at Stanford, Berkeley, Columbia and the National Science Foundation. (As many teams as most startup incubators.)
Get into the Class
When I first started teaching hands-on, project/team entrepreneurship classes we’d take anyone who would apply. After awhile it became clear that by not providing an interview process we were doing these students a disservice. A good number of them just wanted an overview of what a startup was like – an entrepreneurial appreciation class (and we offer some great ones.) But some of our students hadn’t yet developed a passion for entrepreneurship and had no burning idea that they wanted to bring to market. Yet in class they’d be thrown into a “made-up in the first week” startup team and got dragged along as a spear-carrier for someone else’s vision.
Step One – Set a Bar
So as a first step we made students formally apply and interview for the Lean LaunchPad class. We were looking for entrepreneurs who had great ideas and interest in making those ideas really happen. We’d hold mixers before the first class and the students would form their teams during week one of the class.
But we found we were wasting a week or more as the teams formed and their ideas gelled.
Step Two – Apply As A Team
So next time we taught, we had the students apply to the class as a team. We hold information sessions a month or more before the classes. Here students with preformed teams could come and have an interview with the teaching team and get admitted. Or those looking to find other students to join their team could mix and market their ideas or join others and then interview for a spot. This process moved the team logistics out of class time and provided us with more time for teaching.
But we had been selecting teams for admission on the basis of whether they had the best ideas. We should have known better. In the classroom, as in startups, the best ideas in the hands of a B team is worse than a B idea in the hands of a world class team.
Here’s why.
Step Three – Hacker/Hardware, Hustler, Designer, Visionary
As we taught our Lean LaunchPad classes we painfully relearned the lesson that team composition matters as much or more than the product idea. And that teams matter as much in entrepreneurial classes as they do in startups.
In a perfect world you build your vision and your customers would run to buy your first product exactly as you spec’d and built it. We now know that this ‘build it and they will come” is a prayer rather than a business strategy. In reality, a startup is a temporary organization designed to search for a repeatable and scalable business model. This means the brilliant idea you started with will change as you iterate and pivot your business model until you find product/market fit.
The above paragraph is worth reading a few times.
It basically says that a startup team needs to be capable of making sudden and rapid shifts – because it will be wrong a lot. Startups are inherently chaos. Conditions on the ground will change so rapidly that the original well-thought-out business plan becomes irrelevant.
And finding product/market fit in that chaos requires a team with a combination of skills.
What skills? Well it depends on the industry you’re in, but generally great technology skills (hacking/hardware/science) great hustling skills (to search for the business model, customers and market,) great user facing design (if you’re a web/mobile app,) and by having long term vision and product sense. Most people are good at one or maybe two of these, but it’s extremely rare to find someone who can wear all the hats.
It’s this combination of skills is why most startups are founded by a team, not just one person.
University Silos
While building these teams are hard in the real world, imagine how hard it is in a university with classes organized as silos. Business School classes were only open to business school students, Engineering School classes were only open to engineering school students, etc. No classes could be cross-listed. This meant that you couldn’t offer students an accurate simulation of what a startup team would look like. (In our business school classes we had students with great ideas but lacking the technical skills to implement it. And some of our engineering teams could have benefited from a role-model to follow as a hustler.)
So the next time we taught, we managed to ensure that the class was cross-listed and that the student teams had to have a mix of both business and engineering backgrounds.
I think we’ve finally got the team composition right – relearning all the lessons investors already knew.
But now on to the next goal – getting our mentor program correct.
Lessons Learned
- Finding product/market fit in startup chaos requires a team with a combination of skills
- Hacker/Hardware, Hustler, Designer, Visionary
- At times an A+ market (huge demand, unmet need) may trump all
- Getting the Mentors right is the next step
Filed under: Customer Development, Family/Career/Culture, Lean LaunchPad, Teaching | 38 Comments »
How To Build a Web Startup – Lean LaunchPad Edition
Posted on September 22, 2011 by steveblank
If you’re an experienced coder and user interface designer you think nothing is easier than diving into Ruby on Rails, Node.js and Balsamiq and throwing together a web site. (Heck, in Silicon Valley even the waiters can do it.)
But for the rest of us mortals whose eyes glaze over at the buzzwords, the questions are, “How do I get my great idea on the web? What are the steps in building a web site?” And the most important question is, “How do I use the business model canvas and Customer Development to test whether this is a real business?”
My first attempt at helping students answer these questions was by putting together the Startup Tools Page - a compilation of available web development tools. While it was a handy reference, it still didn’t help the novice.
So today, I offer my next attempt.
How To Build a Web Startup – The Lean LaunchPad Edition
Here’s the step-by-step process we suggest our students use in our Lean LaunchPad classes.
- Set up the logistics to manage your team
- Craft company hypotheses
- Write a value proposition statement that other people understand
- Set up the Website Logistics
- Build a “low-fidelity” web site
- Get customers to the site
- Add the backend code to make the site work
- Test the “problem” with customer data
- Test the “solution” by building the “high-fidelity” website
- Ask for money
(Use the Startup Tools Page as the resource for tool choices)
Step 1: Set Up Team Logistics
- Read Business Model Generation pages 1-72, and The Four Steps to the Epiphany Chapter 3
- Set up the Lean LaunchLab or a WordPress blog to document your Customer Development progress
- Use Skype or Google+ Hangouts for team conversations
Step 2. Craft Your Company Hypotheses (use the Lean LaunchLab)
- Write down your 9-business model canvas hypothesis
- List key features/Minimal Viable product plan
- Size the market opportunity. Use Google Trends, Google Insights, and Facebook ads to evaluate the market growth potential. Use Crunchbase to look at competitors.
- Calculate Total Available Market, and customer value.
- Pick market type (existing, new, resegmented)
- Prepare weekly 7-minute class progress summary: business model canvas update + weekly Customer Development summary (described after Step 10.)
Step 3: Write a value proposition statement that other people understand
- If you can’t easily explain why you exist, none of the subsequent steps matter. A good format is “We help X do Y by doing Z”.
- Once you have a statement in that format, find a few other people (doesn’t matter if they’re your target market) and ask them if it makes sense.
- If not, give them a longer explanation and ask them to summarize that back to you. Other people are often better than you at crafting an understandable value proposition.
Step 4: Website Logistics
- Get a domain name for your company. To find an available domain quickly, try Domize or Domainr
- Then use godaddy or namecheap to register the name. (RetailMeNot usually has ~ $8/year discount coupons for Godaddy You may want to register many different domains (different possible brand names, or different misspellings and variations of a brand name.)
- Once you have a domain, set up Google Apps on that domain (for free!) to host your company name, email, calendar, etc
- Read Learning how to code
For coders: set up a web host
- Use virtual private servers (VPS) like Slicehost or Linode (cheapest plans ~$20/month, and you can run multiple apps and websites)
- You can install Apache or Nginx with virtual hosting, and run several sites plus other various tools of your choice (assuming you have the technical skills of course) like a MySQL database
- If you are actually coding a real app, (rather than for class) use a “Platform As A Service” (PAAS) like Heroku, DotCloud or Amazon Web Services if your app development stack fits their offerings
- BTW: You can see the hosting choices of YCombinator startups here
Customer Discovery for the Web
Step 5: Build a Low-Fidelity Web Site
- Depending on your product, this may be as simple as a splash page with: your value proposition, benefits summary, and a call-to-action to learn more, answer a short survey, or pre-order.)
- For surveys and pre-order forms, Wufoo and Google Forms can easily be embedded within your site with minimal coding.
For non-coders:
- Make a quick prototype in PowerPoint, or
- Use Unbounce, Google Sites, Weebly, Godaddy, WordPress or Yola
- For surveys and pre-order forms, Wufoo and Google Forms can easily be embedded within your site with minimal coding.
- Even non-coders should understand the coding buzzwords see here
For coders: build the User Interface
- Pick a website wireframe prototyping tool, (i.e. JustinMind, Balsamiq)
- 99 Designs is great to get “good enough” graphic design and web design work for very cheap using a contest format. Themeforest has great designs
- Create wireframes and simulate your “Low Fidelity” website
- Create a fake sign up/order form to test customer commitment. Alternatively, create a “viral” landing page, with LaunchRock or KickoffLabs
- Embed a slideshow on your site with Slideshare or embed a video/tour using Youtube or Vimeo
- Do user interface testing with Usertesting or Userfy
Step 6: Customer Engagement (drive traffic to your preliminary website)
- Start showing the site to potential customers, testing customer segment and value proposition
- Use Ads, textlinks or Google AdWords, Facebook ads and natural search to drive people to your Minimally Viable web site
- Use your network to find target customers – ask your contacts, “Do you know someone with problem X? If so, can you forward this message on to them?” and provide a 2-3 sentence description
- For B2B products, Twitter, Quora, and industry mailing lists are a good place to find target customers. Don’t spam these areas, but if you’re already an active participant you can sprinkle in some references to your site or you can ask a contact who is already an active participant to do outreach for you.
- Use Mailchimp, Postmark or Google Groups to send out emails and create groups
- Create online surveys with Wufoo or Zoomerang
- Get feedback on your Minimum Viable Product (MVP) features and User Interface
Step 7: Build a more complete solution (Connect the User Interface to code)
- Connect the UI to a web application framework (for example, Node.js, Rubyon Rails, Django, SproutCore, jQuery, Symfony, Sencha, etc.)
Step 8: Test the “Customer Problem” by collecting Customer Data
- Use Web Analytics to track hits, time on site, source. For your initial site, Google Analytics provides adequate information with the fastest setup. Once you’ve moved beyond your initial MVP, you’ll want to consider a more advanced analytic platform (Kissmetrics, Mixpanel, Kontagent, etc)
- Create an account to measure user satisfaction (GetSatisfaction, UserVoice, etc.) from your product and get feedback and suggestions on new features
- Specific questions, such as “Is there anything preventing you from signing up?” or “What else would you need to know to consider this solution?” tend to yield richer customer feedback than generic feedback requests.
- If possible, collect email addresses so that you have a way to contact individuals for more in-depth conversations.
Step 9: Test the “Customer Solution” by building a full featured High Fidelity version of your website
- Update the Website with information learned in Step 5-8
- Remember that “High Fidelity” still does not mean “complete product”. You need to look professional and credible, while building the smallest possible product in order to continue to validate.
- Keep collecting customer analytics
- Hearing “This is great, but when are you going to add X?” is your goal!
Step 10: Ask for money
- Put a “pre-order” form in place (collecting billing information) even before you’re ready to collect money or have a full product.
- When you’re ready to start charging – which is probably earlier than you think – find a billing provider such as Recurly, Chargify, or PayPal to collect fees and subscriptions.
For all Steps: Monitor and record changes week by week using the Lean LaunchLab
For Class: Use the Lean LaunchLab to produce a 7-minute weekly progress presentation
- Start by putting up your business model canvas
- Changes from the prior week should be highlighted in red
- Lessons Learned. This informs the group of what you learned and changed week by week – Slides should describe:
- Here’s what we thought (going into the week)
- Here’s what we found (Customer Discovery during the week)
- Here’s what we’re going to do (for next week)
- Emphasis should be on the discovery done for that weeks assigned canvas component (channel, customer, revenue model) but include other things you learned about the business model.
———
If you’re Building a Company Rather Than a Class Project
- Go through the legal steps of setting up a company. U.S. version here.
- Search the US Patent Office (for free) for similar trademarks to yours
- When you confirmed your product and identity, and obtained a good domain name, and a trademark you think you can own, register your company on Twitter, Facebook, LinkedIn, CrunchBase, and AngelList pages
- Incorporate the company
———
Thanks for the comments, suggestions, corrections, and additions. Updates added.
Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad | 56 Comments »
Eureka! A New Era for Scientists and Engineers
Posted on July 28, 2011 by steveblank
Silicon Valley was born in an era of applied experimentation driven by scientists and engineers. It wasn’t pure research, but rather a culture of taking sufficient risks to get products to market through learning, discovery, iteration and execution. This approach would shape Silicon Valley’s entrepreneurial ethos: In startups, failure was treated as experience (until you ran out of money).
The combination of Venture Capital and technology entrepreneurship is one of the great business inventions of the last 50 years. It provides private funds for untested and unproven technology and entrepreneurs. While most of these investments fail, the returns for the ones that win are so great they make up for the failures. The cultural tolerance for failure and experimentation, and a financial structure which balanced risk, return and obscene returns, allowed this system flourish in technology clusters in United States, particularly in Silicon Valley.
Yet this system isn’t perfect. From the point of view of scientists and engineers in a university lab, too often entrepreneurship in all its VC-driven glory – income statements, balance sheets, business plans, revenue models, 5-year forecasts, etc. – seems like another planet. There didn’t seem to be much in common between the Scientific Method and starting a company. And this has been a barrier to commercializing the best of our science research.
Until today.
Today, the National Science Foundation (NSF) – the $6.8-billion U.S. government agency that supports research in all the non-medical fields of science and engineering - is changing the startup landscape for scientists and engineers. The NSF has announced the Innovation Corps – a program to take the most promising research projects in American university laboratories and turn them into startups. It will train them with a process that embraces experimentation, learning, and discovery.
The NSF will fund 100 science and engineering research projects every year. Each team accepted into the program will receive $50,000.
To commercialize these university innovations NSF will be putting the Innovation Corps (I-Corps) teams through a class that teaches scientists and engineers to treat starting a company as another research project that can be solved by an iterative process of hypotheses testing and experimentation. The class will be a version of the Lean LaunchPad class we developed in the Stanford Technology Ventures Program, (the entrepreneurship center at Stanford’s School of Engineering).
—–
This is a big deal. Not just for scientists and engineers, not just for every science university in the U.S., but in the way we think about bringing discoveries ripe for innovation out of the university lab. If this program works it will change how we connect basic research to the business world. And it will lead to more startups and job creation.
—–
Introducing the Innovation-Corps
The NSF Innovation-Corps program (I-Corps) is designed to help bridge the gap between the many scientists and engineers with innovative research and technologies, but little knowledge of the first steps to take in starting a company.
I-Corps will help scientists take the first steps from the research lab to commercialization.
Over a period of six months, each I-Corps team, guided by experienced mentors (entrepreneurs and VC’s) will build their product and get out of their labs (and comfort zone) to discover who are their potential customers, and how those customers might best use the new technology/invention. They’ll explore the best way to deliver the product to customers, the resources required, as well as competing technologies. They will answer the question, “What value will this innovation add to the marketplace? And they’ll do this using the business model / customer development / agile development solution stack.
At the end of the program each team will understand what it will takes to turn their research into a commercial success. They may decide to license their intellectual property based on their research. Or they may decide to cross the Rubicon and try to get funded as a startup (with strategic partners, investors, or NSF programs for small businesses). At the end of the class there will be a Demo Day when investors get to see the best this country’s researchers have to offer.
What Took You So Long
A first reaction to the NSF I-Corps program might be, “You mean we haven’t already been doing this?” But on reflection it’s clear why. The common wisdom was that for scientists and engineers to succeed in the entrepreneurial world you’d have to teach them all about business. But it’s only now that we realize that’s wrong. The insight the NSF had is that we just need to teach scientists and engineers to treat business models as another research project that can be solved with learning, discovery and experimentation.
And Stanford’s Lean LaunchPad class could do just that.
Join the I-Corps
Today at 2pm the National Science Foundation is publishing the application for admission (what they call the “solicitation for proposals”) to the program. See the NSF web page here.
The syllabus for NSF I-Corps version of the Lean LaunchPad class can be seen here.
Along with a great teaching team at Stanford, world-class VC’s who get it, and foundation partners, I’m proud to be a part of it.
This is a potential game changer for science and innovation in the United States.
Join us.
Apply now.
Filed under: Lean LaunchPad, Teaching, Venture Capital | 27 Comments »
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