Designing a Corporate Entrepreneurship Program – A Qualcomm Case Study (part 1 of 2)

Posted on January 28, 2013 by steve blank

I ran into Ricardo Dos Santos and his amazing Qualcomm Venture Fest a few years ago and was astonished with its breath and depth.  From that day on, when I got asked about which corporate innovation program had the best process for idea selection, I started my list with Qualcomm.

This is Ricardo’s “post mortem” account of the life and death of a corporate entrepreneurship program.  Part 1 outlining the program is here.  Part 2 describing the challenges and “lessons learned” will follow.

———-

The origin
In 2006, as a new employee of the Fortune 100 provider of wireless technology and services, San Diego’s Qualcomm, I volunteered to salvage a fledging idea management system (fancy term for an online suggestion box) by turning into a comprehensive corporate entrepreneurship program.

Qualcomm’s visionary CEO, Paul Jacobs, wanted to use internal Qualcomm ideas to find breakthrough innovation that could be turned into products, (not simply a suggestion box for creative thoughts or improving sustaining innovation.)  He gave my innovation team free reign on designing a new employee innovation program. His only request was that we keep two of the original program’s goals:

1. The program had to remain fully open to employees from all divisions.
2. The ideas were to be implemented by existing business or R&D units – i.e., no need to create new permanent infrastructures for innovation.

And he added a third goal that would ensure his greater involvement and support going forward.

3. The program had to have an efficient mechanism to bubble-up the best ideas (and their champions) to the timely attention of the top executive team.

The design challenge

We wanted to transform our simple online suggestion box into a program that encouraged employees to behave like intrapreneurs (and their managers and executives as enablers).  Our challenge was to design a program that could:

  • Teach participants on how to turn their ideas into fundable experiments.
  • Educate employees who submit ideas that in corporations, there is no magic innovation leprechaun at the end of the rainbow that turn their unsolicited suggestions into pots of gold – they themselves had to take ownership and fight for their ideas.

All while keeping in mind that employees, managers and executives have day jobs – so how could we ask them to spend significant time on new ideas while not sacrificing their present obligations?

Thus began our search for a program that would properly balance the focus on the present with the need to increase our options for the future.

Qualcomm Innovation Process

Qualcomm Innovation Process

Qualcomm’s Corporate Entrepreneurship Program – Venture Fest
In 2006 we searched outside of Qualcomm for other similar entrepreneurship programs where participants also had to balance other obligations.  We realized this mechanism had been occurring for years at University’s startup competitions, such as the MIT 100K Accelerate Contest.   In these competitions, multidisciplinary self-forming teams of students work part time to pitch new companies.  The program we implemented inside of Qualcomm ended up being very similar.  We dubbed the program Qualcomm’s Venture Fest and the process, “Collective Entrepreneurship”, a three-phase program combining crowdsourcing with entrepreneurial techniques for startup creation.

The first phase of the program leveraged the idea management system to collect a large number of competing entries then ultimately down-selected to the top 10-20 concepts with the most breakthrough potential, according to peer and expert reviews.

Qualcomm Venture Fest

Qualcomm Venture Fest

The second phase, and heart of the program, was a three-month, part time bootcamp that would prepare idea champions for the internal funding battle that followed.  The bootcamp requested that participants do what entrepreneurs do before requesting seed funding  – Discover, Network and Accelerate.  (In hindsight we were having our employees get out of the building to talk to customers, build prototypes and generate partner interest – essentially doing Customer Discovery years before Steve Blank taught his Lean LaunchPad class at Stanford and the National Science Foundation!). Our employees faced the typical impediments to corporate entrepreneurship – lack of employee time, skills, connections, pre-seed money, and official sources to discuss and manage the risk/rewards tradeoffs of sticking your neck-out. So our program staff built a support system of contextual education, mentorship, micro-funding, and hands-on coaching.

Finally, the third phase of the program, implementation, began with the top team’s pitches to the C-level executive team, which determined the competition winners, prize money and directed other promising teams to target business unit sponsors. Our program staff facilitated the handoff and disseminated the value extracted from any funded experiments, including future option, strategic and exit value.

In retrospect we designed something akin to a startup accelerator, the Lean LaunchPad classes or the National Science Foundation’s Innovation Corps, although none of these existed in 2006.

What went right?
We had C-level support. The CEO of the company embraced the program and supported the process, especially since it brought novel and thought provoking ideas to his executive team’s attention.

The program steadily generated healthy interest from Qualcomm employees – submissions grew from 82 in the first year to over 500 in its fifth and final year.  Several ideas were fully or partially implemented, (with hundreds of millions of USD invested), with a couple of genuine breakthrough successes, and hundreds of related patents were filed.  Employees reported noticeable gains in entrepreneurial skills and attitude, and the CEO seemed happy with how his baby was being raised.

—-

Part 2 – challenges and lessons learned – is here.
Listen to the post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Corporate/Gov't Innovation, Customer Development, Teaching | 8 Comments »

The Future of Corporate Innovation and Entrepreneurship

Posted on December 3, 2012 by steve blank

Almost every large company understands it needs to build an organization that deals with the ever-increasing external forces of continuous disruption, the need for continuous innovation, globalization and regulation.

But there is no standard strategy and structure for creating corporate innovation.

We outline the strategy problem in this post and will propose some specific organizational suggestions in follow-on posts.

—-

I’m sitting at the ranch with Alexander Osterwalder, Henry Chesbrough and Andre Marquis listening to them recount their lessons-learned consulting for some of the world’s largest corporations. I offered what I just learned from spending a day at the ranch with the R&D group of a $100 billion corporation along with the insights my Startup Owners Manual co-author Bob Dorf who has several Fortune 100 clients.Osterwalder Chesbrough Marquis

(Full disclosure. I’m recovering from a reading spree of Chandlers Strategy and Structure, Gary Hamel’s The Future of Management and The Other Side of Innovation by Trimble and Govindarajan, Henry Chesbrough’s Open Innovation, as well as The Innovator’s DNA from Dyer, Gregersen and Christensen. So some or most of this post might be that I’ve overdosed on business books for the month.)

Collectively we’re beginning to see a pattern and we want to offer some concrete suggestions about Corporate Management and Innovation strategy and the structural (i.e. organizational) changes corporations need to make.

If we’re right, it will give 21st companies a way to deal with innovation – both sustaining and disruptive – as a normal course of business rather than by exception or crisis. Companies will be organized around Continuous Innovation.

Strategy and Structure in the 21st Century
While companies have existed for the last 400 years, their modern form is less than 150 years old. In the U.S. the growth of railroads, telegraph, meat packers, steel and industrial equipment forced companies to deal with the strategies of how to organize a complex organization. In turn, these new strategies drove the need for companies to be structured around functions (manufacturing, purchasing, sales, etc.)

90 years ago companies faced new strategic pressures as physical distances in the United States limited the reach of day-to-day hands-on management. In addition, firms found themselves now managing diverse product lines. In response, another structural shift in corporate organization occurred. In the 1920’s companies restructured from monolithic functional organizations (sales, marketing, manufacturing, purchasing, etc.) and reorganized into operating divisions (by product, territory, brand, etc.) each with its own profit and loss responsibility. This strategy-to-structure shift from functional organizations to operating divisions was led by DuPont and popularized by General Motors and quickly followed by Standard Oil and Sears.

GM 1925 org chart

General Motors Organization Chart ~1925

In each case, whether it was organizing by functions or organizing by operating divisions, the diagram we drew for management was an organization chart. Invented in 1854 by Daniel McCallum, superintendent of the New York and Erie railroad, the org chart became the organizing tool for how to think about strategy and structure.   It allowed companies to visually show command and control hierarchies – who’s responsible, what they are responsible for and who they manage underneath them, and report to above them.  (The irony is that while the org chart may have been new for companies, the hierarchies it described paralleled military organization and had been around since the Roman Legion.)

While org charts provided the “who” of a business, companies were missing a way to visualize the “how” of a business. In the 1990’s Strategy Maps provided the “How.” Evolved from Balanced Scorecards by Kaplan and Norton, Strategy Maps are a visual representation of an organization’s strategy. Strategy Maps are a tool to translate the strategy into specific actions and objectives to measure the progress of how the strategy gets implemented (but offer no help on how to create new strategies.).

Strategy Maps from Robert Kaplan

Strategy Maps from Robert Kaplan

By the 21st century, organizations still lacked a tool to create and formulate new strategies.  Enter the Business Model Canvas. The canvas describes the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value). The canvas ties together the “who and how” and provides the “why”. External to the canvas are the environmental influences (industry forces, market forces, key trends and macro-economic forces.)  With the business model canvas in hand, we can now approach rethinking corporate innovation strategy and structure.

Business Model Canvas

Management Innovation in the 21st Corporation
Existing companies and their operating divisions implement known business models. Using the business model canvas, they can draw how their organization is creating, delivering, and capturing value. A business model for an existing company or division is not filled with hypotheses, it is filled with a series of facts. Operating divisions execute the known business model. Plans and processes are in place, and rules, job specifications, revenue, profit and margin goals have been set. Forecasts can be based on a series of known conditions.

BusinessModel Innovation in existing companies

Inside existing companies and divisions, the business model canvas is used as a tool to implement and continuously improve existing business models incrementally. This might include new products, markets or acquisitions.

A New Strategy for Entrepreneurship in the 21st Corporation

Yet, simply focusing on improving existing business models is not enough anymore. To assure their survival and produce satisfying growth, corporations need to invent new business models. This challenge requires entirely new organizational structures and skills.

This is not unlike the challenges corporations were facing in the 1920’s. Companies then found that their existing strategy and structures (organizations) were inadequate to respond to a changing world. We believe that the solution for companies today is to realize that what they are facing is a strategy and structure problem, common to all companies.

The video below (from Strategyzer.com) emphasizes that companies will need to have an organization that can do two things at the same time:  executing and improving existing models and inventing  – new and disruptive – business models.

We propose that corporations equipped for the challenges of the 21st century think of innovation as a sliding scale between execution and search.

  1. For companies to survive in the 21st century they need to continually create a new set of businesses, by inventing new business models.
  2. Most of these new businesses need to be created outside of the existing business units.
  3. The exact form of the new business models is not known at the beginning. It only emerges after an intense business model design and search activity based on the customer development process.
  4. Companies will have to maintain a portfolio of new business model initiatives, not unlike a venture capital firm, and they will have to accept that maybe only 1 out 10 initiatives might succeed.
  5. To develop this new portfolio, companies need to provide a stable innovation funding mechanism for new business creation, one that is simply thought of as a cost of doing business
  6. Many of the operating divisions can and should provide resources to the new businesses inside the company
  7. We need a new organizational structure to manage the creation of new businesses and to coordinate the sharing of business model resources.
  8. Some of these new businesses might become new resources to the existing operating units in the company or they could grow into becoming the new profit generating business units of the company’s future.

In future blog posts we’ll propose a specific structure for Entrepreneurship and Continuous Innovation in the 21st Corporation.

Lessons Learned

  • Continuous disruption will be the norm for corporations in the 21st century
  • Continuous innovation – in the form of new businesses-  will be the path for long term corporate survival
  • Current corporate organizational models are inadequate for the task
  • We will propose some alternatives

Listen to the post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Corporate/Gov't Innovation, Customer Development | 36 Comments »

10,000 Startups – Startup Weekend Next

Posted on October 30, 2012 by steve blank

Today we are announcing the biggest entrepreneurial program ever launched – Startup Weekend Next. A partnership of Startup Weekend, Startup America, TechStars and Udacity, Startup Weekend Next brings four weeks of amazing hands-on training learning to build your startup to cities around the world. Our goal– to inspire, educate and empower hundred’s of thousands of entrepreneurs and help create 10,000 startups.

The Lean LaunchPad Class
You may have read my previous posts about the Lean LaunchPad entrepreneurship class. The class teaches founders how to dramatically reduce their failure rate through the combination of business model design, customer development and agile development using the Startup Owners Manual. Just a crazy idea two years ago, the class is now taught at Stanford, Berkeley, Columbia, Caltech, Princeton and for the National Science Foundation at the University of Michigan and Georgia Tech.

And in the thirty days since we’ve put the Lean LaunchPad class online at Udacity – 50,000 students have been taking it.

While the Lean LaunchPad online has received rave reviews (it’s being translated into Spanish, French, Russian, Japanese and Greek, and it’s being used as part of a “flipped classroom” in other entrepreneurship courses), it’s different than taking the class in person. It doesn’t require you to form a team, and there’s no immediate instructor feedback. More importantly, it makes no demands of you to stand and deliver your weekly customer development progress in front of your peers. In sum, it lacks the rigorous and collaborative hands-on experience that entrepreneurs get in our university classes.

We thought long and hard about how we could take the Lean LaunchPad Online to the next level and deliver the same level of experiential instruction to tens and hundreds of thousands of entrepreneurs around the world.

The result – Startup Weekend Next.

Hands-On in 100’s of Cities
Startup Weekend Next is a four-week version of the Lean LaunchPad class with hands-on instructors and mentors – and we will teach it in hundreds of cities around the world.

I’m partnered with four great organizations to deliver the program. The class is organized, led and delivered by Startup Weekend, the global non-profit that teaches entrepreneurs how to launch a startup in 54 hours. They’ve hosted close to 800 Startup Weekend events in over 350 cities worldwide educating a staggering 57,000 entrepreneurs who’ve created over 5,000 startups. Today they are going to take Startup Weekend to the next level by organizing and teaching a four-week version of the Lean LaunchPad class as their Startup Weekend Next course. Their reach and scale means our goal of helping to create 10,000 startups is within our grasp.

(If you can’t see the video above click here.)

In addition, the leading experts in building entrepreneurial companies and regions, TechStars and Startup America are partnering with us in this endeavor.

In the U.S, Startup America will leverage its network of 30 startup regions to engage entrepreneurial leaders throughout the country. And TechStars will use its broad and unparalleled network of mentors (experienced entrepreneurs and investors) to coach the teams. And Udacity has put their awesome production resources behind the class and hosts the Lean LaunchPad online lectures.  And we are looking for other partners worldwide to help make this successful.

The first four-week Startup Weekend Next classes will start on Nov. 28 in more than 25 cities worldwide. The program expands to all of Startup Weekend’s 350 member communities in 2013 where it will be offered up to five times a year in each city.

The cost of attending a Startup Weekend Next is ridiculously inexpensive. It doesn’t take equity and just has a small fee that varies by city ($140 to $299), to cover event operations and expenses.

How it Works
We now know how to crack the entrepreneurial code by creating an Entrepreneurship API – a standard language for entrepreneurs. When you leave the class, you’ll know how to think about your startup in the now standard  “language” of the business model canvas. You’ll understand the customer development process used to test those hypotheses and learn how to iterate or pivot when your hypotheses need to change.  And you’ll learn about how to build a minimal viable product to get feedback early and often from customers.

Here’s how the four intense weeks in a Startup Weekend Next class works.

  • You form a startup team (if you don’t have one, taking the 54-hour Startup Weekend class is a great a way to find one) and come into class with an initial idea
  • Your team arrives with an initial Business Model Canvas. (Your pre-class reading is to watch the Lean LaunchPad initial lectures on Udacity)
  • You present your hypotheses and what you learned in front of your peers and coaches
  • Your team gets live coaching and advice from Startup Weekend Next mentors.
  • You’ll take the suggestions from the meeting, get out of the building and talk to ten plus customers per week.
  • You’ll refine your business model by iterating or pivoting your product, your target customers, pricing, channels, partners, etc.
  • Repeat for four weeks– all while working with volunteer mentor partners from Startup Weekend, Startup America and TechStars – serial entrepreneurs and seasoned startup investors – to see whether your business idea was truly a vision or simply a hallucination.

The Big Idea – Incubators – Accelerators – and Something New
In the last decade startup incubators have become increasingly popular. These incubators which provides new startups with year-round physical office space, infrastructure and advice in exchange for a fee (often in equity.)  They may be privately run but often are non-profit, attached to a university or in some locations a local government.  There is no formal “start date” so there is a no fixed time for their stay. (For some incubators, entrepreneurs can stay as long as they want.) There is no curriculum and seldom any formal instructors or mentors. There is no guaranteed funding. Think of incubators as “shelter from the storm.”

In contrast, the goal of an accelerator is not physical office space, it’s a fundable company. Startups enter and leave as a cohort (starting and ending the program at the same time) in a program of a set length. While there is no formal curriculum, most offer weekly expert lectures, experienced mentors, coaching and introductions.  Accelerators provide funding at the end of the program.  Getting into an accelerator is more competitive than grad school.

Startup Weekend Next represents something new – a pre-accelerator.

Like an accelerator there is no physical office space, and startups enter and leave as a cohort in a program of a set length. But the key difference is that Startup Weekend Next engages you in a formal curriculum. We believe we know what startups need to learn, and we focus on teaching you that. Instead of guest lecturers, you get out of the building and you learn by doing. Like the best accelerators, you get experienced mentors, coaching and introductions. Unlike accelerators, there is no funding at the end of the program.  But you leave knowing a lot more of what it takes to build a company beyond a PowerPoint deck for a VC presentation.

Lessons Learned

If you have passion, an idea and a team, and you want to take advantage of the most advanced entrepreneurial training program, sign up at Startup Weekend Next…

and wait until you see what we do next.
Listen to the post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 45 Comments »

10,000 Startups

Posted on October 29, 2012 by steve blank

In 24 hours we’ll announce something revolutionary.

Moving entrepreneurship forward.

Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 30 Comments »

The Lean LaunchPad Online

Posted on September 6, 2012 by steve blank

You may have read my previous posts about the Lean LaunchPad class taught at Stanford, Berkeley, Columbia, Caltech and for the National Science Foundation.

Now you too can take this course.

I’ve worked with the Udacity, the best online digital university on a mission to democratize education, to produce the course. They’ve done an awesome job.

The course includes lecture videos, quizzes and homework assignments. Multiple short video modules make up each 20-30 minute Lecture. Each module is roughly three minutes or less, giving you the chance to learn piece by piece and re-watch short lesson portions with ease. Quizzes are embedded within the lectures and are meant to let you check-in with how completely you are digesting the course information. Once you take a quiz, which could be a multiple-choice quiz or a fill in the blank quiz, you will receive immediate feedback.

Sign up here

——–

Why This Class?

Ten years ago I started thinking about why startups are different from existing companies.  I wondered if business plans and 5-year forecasts were the right way to plan a startup.  I asked, “Is execution all there is to starting a company?”

Experienced entrepreneurs kept finding that no business plan survived first contact with customers. It dawned on me that the plans were a symptom of a larger problem: we were executing business plans when we should first be searching for business models. We were putting the plan before the planning.

So what would a search process for a business model look like? I read a ton of existing literature and came up with a formal methodology for search I called Customer Development.

That resulted in a new process for Search: Customer Development + traditional product management/Waterfall Engineering. It looked like this:

This meant that the Search for a business model as a process now could come before execution. So I wrote a book about this called the Four Steps to the Epiphany.

And in 2003 the Haas Business School at U.C. Berkeley asked me to teach a class in Customer Development.  With Rob Majteles as a co-instructor, I started a tradition of teaching all my classes with venture capitalists as co-instructors.

In 2004 I funded IMVU, a startup by Will Harvey and Eric Ries. As a condition of my investment I insisted Will and Eric take my Customer Development class at Berkeley. Having Eric in the class was the best investment I ever made. Eric’s insight was that traditional product management and Waterfall development should be replaced by Agile Development.  He called it the “Lean Startup.”

Meanwhile, I had said startups were “Searching” for a business model, I had been purposefully a bit vague about what exactly a business model looked like. For the last two decades there was no standard definition.  That is until Alexander Osterwalder wrote Business Model Generation.

This book was a real breakthrough. Now we understood that the strategy for startups was to first search for a business model and then after you found it, put together an operating plan.

Now we had a definition of what it was startups were searching for. So business model design + customer and agile development is the process that startups use to search for a business model.

And the organization to implement all this was not through traditional sales, marketing and business development groups on day one. Instead the founders need to lead a customer development team.

And then to get things organized Bob Dorf and I wrote a book, The Startup Owners Manual that put all these pieces together.

But then I realized rather than just writing about it, or lecturing on Customer Development, we should have a hands-on experiential class. So my book and Berkeley class turned into the Lean LaunchPad class in the Stanford Engineering school, co-taught with two VC’s – Jon Feiber and Ann Miura-Ko. And we provided dedicated mentors for each team.

Then in the fall of 2011, the National Science Foundation read my blog posts on the Stanford version of the Lean LaunchPad class.  They said scientists had already made a career out of hypotheses testing, and the Lean LaunchPad was simply a scientific method for entrepreneurship. They asked if I could adapt the class to teach scientists who want to commercialize their basic research. I modified the class and recruited another great group of VC’s and entrepreneurs – Jim Hornthal, John Burke, Jerry Engel,Bhavik Joshi and Oren Jacob – to teach with me.

We taught the first two classes of 25 teams each, and then in March of 2012 trained faculty from Georgia Tech and the University of Michigan how to teach the class at their universities. Georgia Tech and the University of Michigan faculty then taught 54 teams each in July of this year and will teach another 54 teams in October.

We then added four more schools – Columbia, Caltech, Princeton and Hosei – where our team taught the Lean LaunchPad. We also developed a 5-day version of the class to complement the full semester and quarter versions.

Then last month we partnered with NCIIA and taught 62 college and university educators in our first Lean LaunchPad Educators Program.

And now we’ve spent weeks in the Udacity studio putting the lecture portion of the Lean LaunchPad class online.

Sign up and find out how to start a company!

Listen to the post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 53 Comments »

Five Days to Change the World – The Columbia Lean LaunchPad Class

Posted on April 28, 2012 by steve blank

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

Listen to the post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 17 Comments »

Stanford 2012 Lean LaunchPad Presentations – part 2 of 2

Posted on March 14, 2012 by steve blank

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 steve blank

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.
Listen to the post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 10 Comments »

Search versus Execute

Posted on March 5, 2012 by steve blank

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

Listen to the post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Corporate/Gov't Innovation, Customer Development, Lean LaunchPad, Teaching | 28 Comments »

Killing Your Startup By Listening to Customers

Posted on February 27, 2012 by steve blank

The art of entrepreneurship and the science of Customer Development is not just getting out of the building and listening to prospective customers. It’s understanding who to listen to and why.

Five Cups of Coffee
I got a call from Satish, one of my ex-students last week. He got my attention when he said, “following your customer development stuff is making my company fail.” The rest of the conversation sounded too confusing for me to figure out over the phone, so I invited him out to the ranch to chat.

When he arrived, Satish sounded like he had 5 cups of coffee. Normally when I have students over, we’d sit in the house and we’d look at the fields trying to catch a glimpse of a bobcat hunting.  But in this case, I suggested we take a hike out to Potato Patch pond.

Potato Patch Pond
We took the trail behind the house down the hill, through the forest, and emerged into the bright sun in the lower valley. (Like many parts of the ranch this valley has its own micro-climate and today was one of those days when it was ten degrees warmer than up at the house.)

As we walked up the valley Satish kept up a running dialog catching me up on six years of family, classmates and how he started his consumer web company. It had recently rained and about every 50 feet we’d see another 3″ salamander ambling across the trail. When the valley dead-ended in the canyon, we climbed 30-foot up a set of stairs and emerged looking at the water. A “hanging pond” is always a surprise to visitors. All of a sudden Satish’s stream of words slowed to a trickle and just stopped. He stood at the end of the small dock for a while taking it all in. I dragged him away and we followed the trail through the woods, around the pond, through the shadows of the trees.

As we circled the pond I tried to both keep my eyes on the dirt trail while glancing sideways for pond turtles and red-legged frogs. When I’m out here alone it’s quiet enough to hear the wind through the trees, and after awhile the sound of your own heartbeat. We sat on the bench staring across the water, with the only noise coming from ducks tracing patterns on the flat water. Sitting there Satish described his experience.

We Did Everything Customers Asked For
“We did every thing you said, we got out of the building and talked to potential customers. We surveyed a ton of them online, ran A/B tests, brought a segment of those who used the product in-house for face-to-face meetings. ” Yep, sound good.

“Next, we built a minimum viable product.”  Ok, still sounds good.

“And then we built everything our prospective customers asked for.”  That took me aback. Everything?  I asked?  “Yes, we added all their feature requests and we priced the product just like they requested.  We had a ton of people come to our website and a healthy number actually activated.”  That’s great I said, “but what’s your pricing model?’  “Freemium,” came the reply.

Oh, oh. I bet I knew the answer to the next question, but I asked it anyway.  “So, what’s the problem?”

“Well everyone uses the product for awhile, but no one is upgrading to our paid product. We spent all this time building what customers asked for. And now most of the early users have stopped coming back.”

I looked at hard at Satish trying to remember where he had sat in my class.  Then I asked, “Satish, what’s your business model?

What’s your business model?
“Business model?  I guess I was just trying to get as many people to my site as I could and make them happy. Then I thought I could charge them for something later and sell advertising based on the users I had.”

I pushed a bit harder.

“Your strategy counted on a freemium-to-paid upgrade path. What experiments did you run that convinced you that this was the right pricing tactic? Your attrition numbers mean users weren’t engaged with the product. What did you do about it?”

“Did you think you were trying to get large networks of engaged users that can disrupt big markets? Large” is usually measured in millions of users. What experiments did you run that convinced you could get to that scale?”

I realized by the look in his eyes that none of this was making sense. “Well I got out of the building and listened to customers.”

The wind was picking up over the pond so I suggested we start walking.

We stopped at the overlook a top of the waterfall, after the recent rain I had to shout over the noise of the rushing water. I offered that it sounded like he had done a great job listening to customers. And better, he had translated what he had heard into experiments and tests to acquire more users and get a higher percentage of those to activate.

But he was missing the bigger picture. The idea of the tests he ran wasn’t just to get data – it was to get insight.  All of those activities – talking to customers, A/B testing, etc. needed to fit into his business model – how his company will find a repeatable and scalable business model and ultimately make money.  And this is the step he had missed.

Customer Development = The pursuit of customer understanding
Part of Customer Development is understanding which customers make sense for your business.  The goal of listening to customers is not please every one of them.  It’s to figure out which customer segment served his needs – both short and long term. And giving your product away, as he was discovering, is often a going out of business strategy.

The work he had done acquiring and activating customers were just one part of the entire buisness model.

As we started the long climb up the driveway, I suggested his fix might be simpler than he thought.  He needed to start thinking about what a repeatable and scalable business model looked like.

I offered that getting acquiring users and then making money by finding payers assumed a multi-sided market (users/payers). But a freemium model assumed a single-sided market – one where the users became the payers.

He really needed to think through his Revenue Model (the strategy his company uses to generate cash from each customer segment). And how was he going to use Pricing, (the tactics of what he charged in each customer segment) to achieve that Revenue Model.  Freemium was just one of many tactics. Single or multi-sided market? And which customers did he want to help him get there?

My guess was that he was going to end up firing a bunch of his customers – and that was OK.

As we sat back in the living room, I gave him a copy of The Startup Owners Manual and we watched a bobcat catch a gopher.

Lessons Learned

  • Getting out of the building is a great first step
  • Listening to potential customers is even better
  • Getting users to visit your site and try your product feels great
  • Your job is not to make every possible customer happy
  • Pick the customer segments and pricing tactics that drive your business model

Listen to the post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Customer Development | 38 Comments »

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