The Four Steps to the Epiphany is Now in Russian

Posted on August 17, 2011 by steve blank

The Four Steps to the Epiphany (Четыре Шага к Озарению) is now available in Russian.

Thanks to Denis Dovgopoliy for making the Russian version happen.

It joins the French version: Les quatre étapes vers l’épiphanie

and the Japanese version アントレプレナーの教科書 [単行本（ソフトカバー）

Now in Japanese

Pay It Forward
What’s pretty remarkable is these translations are not from a commercial publisher, but rather a labor of entrepreneurial love. All these translations have been crowd-sourced.

Entrepreneurs from Japan, France and now Russia believed they could help startups in their country if the Four Steps to the Epiphany was available in their native tongue. They translated it at their own expense. These are the first three translations and more are underway.

These individuals are “paying it forward” for their communities and country’s. Thousands of entrepreneurs are better for their efforts.

Blame it On Eric
We can blame it all on Eric Ries. When Eric was my student in one of the first Berkeley Customer Development classes, he suggested that I take my class notes, which until then had been printed at Cafepress.com, and offer it widely on Amazon. He said, “I bet there are a few people outside the class who might like to read it.” I photoshopped a cover for my notes, called it the Four Steps to the Epiphany, and bet him he was wrong.  He won the bet.

What A Long Strange Trip It’s Been
I was going to end this post here, but it’s late at night at the ranch and the coyotes are howling in the distance and somewhere closer, out in the redwoods, there’s a barn owl hooting in the trees.

Seeing this book in Russian for me is more than just another translation.

As a child, my mother fled the Soviet Union smuggled out in a hay cart in the middle of Russian Civil war. Until she died, she reminded me that on the way to Ellis Island, her first view of the United States was the Statue of Liberty in New York harbor – and she never looked back. (As kids we memorized the poem inside the statue.)

When I was growing up the odds were pretty low that the Cold War war would end with a whimper rather than a bang. Both the U.S. and the Soviet Union trained daily to kill hundreds of millions of people. Entrepreneurship was a crime in the Soviet Union. In the 1970’s the Soviet military was on the ascendency and wasn’t at all clear that the 20th century would end as the American century (or with 15,000 targeted nuclear warheads, anyones century.)

I spent my late teens here and my early 20’s here next to the sharp end of the spear, and this was no videogame. (There’s equal part irony and satisfaction that Silicon Valley and semiconductor fabs had a role in the demise of the Soviet Union.)

When the Cold War ended I waited for the victory parade down Main Street.

We never did have a parade, but as a consolation prize there’s now a McDonalds in Red Square, entrepreneurship is trying to blossom in a place that had 60 U.S. nuclear weapons aimed at it, my book (a revolutionary manual for capitalism,) is in Russian, and I’ve been asked to give my Secret History of Silicon Valley talk when I visit Moscow for the first time in September.

Good enough.
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There’s Always a Plan B

Posted on August 15, 2011 by steve blank

Everyone has a plan ’till they get punched in the mouth. 
Mike Tyson

One of the key distinctions between an entrepreneur and an operating executive is an entrepreneur’s almost seamless agility in the face of changing circumstances versus an operating executive’s intense execution focus on a plan. World-class entrepreneurs learn how to combine both.

WTF?
Driving home over the mountains from a Coastal Commission hearing, I had time to ponder an email I received from a city official as the road wound through the Redwood trees. The Coastal Commission had found that a zoning change his city requested didn’t conform to the Coastal Act, and we denied it. I felt sorry for him because he had put together a project that depended upon the property owner, developer, unions, hotel operator, local neighbors, city council, weather, wind speed, phase of the moon and astrological sign all aligning just to get the project in front of us. It was like herding cats and pushing water uphill. Reading his email I was sympathetic realizing that if you substituted customers, channel, product development, hiring, board of directors, and fund raising, he was describing a typical day at a startup. I felt real kinship until I got to his last sentence:

“Now we’re screwed because we had no Plan B.”

Say what?

I had to read his email a few times to let this sink in. I kept thinking, “What do you mean there’s no plan B?” When I shared it with the other commissioners who were public officials, all of them could see that there could have been tons of alternate plans to get a project approved, and there were still several options going forward.  But the mayor just had been so intently focussed on executing a complex Plan A he never considered that he might need a Plan B.

By the time the mountain road unwound into rolling pastures and then flattened into the farmland just south of Silicon Valley, I realized that this was a real-world example of the difference between an entrepreneur and an operating executive.

There’s Always a Plan B
My formal definition of a startup is a temporary organization in search of a scalable and repeatable business model. Yet if you’ve founded a company you know that regardless of any formal definition, startups are inherently pure chaos. As a founder, keeping your company alive requires you to think creatively and independently because more often than not, conditions on the ground will change so rapidly that any original well-thought-out plan quickly becomes irrelevant. (It’s equally true for startups, war, love and life.)

The reality is that to survive requires a mindset which can quickly separate the crucial from the irrelevant, synthesize the output, and use this intelligence to create islands of order in the all-out chaos of a startup.  

To do this you are instinctually creating and testing multiple hypotheses which are creating an infinite number of possible future plans. And when the inevitable happens and some or all your assumptions were wrong, you pivot your model into the next plan and continue forward.  You do this until you find a scalable and repeatable business model or you die by running out of money.

Great entrepreneurs don’t just have a Plan B, they have Plans B through ∞

Lessons Learned

  • A startup is initially about the search for a repeatable and scalable business model
  • Most of the time your hypotheses about Plan A, B and C are wrong
  • Searching requires agility, tenacity, resilience, curiosity, opportunism and pattern recognition
  • Execution requires a different set of skills. At times it means bringing an operating executive
  • Operating executives excel at focussed execution
  • World-class technology CEO’s learned how to combine Searching and Execution (Gates, Jobs, Ellison, Bezos, Page, et al)

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Filed under: California Coastal Commission, Customer Development | 23 Comments »

Tune In, Turn On, Drop Out – The Startup Genome Project

Posted on May 29, 2011 by steve blank

In April 2010 I received an email that said, “I’m an incoming Stanford student in the fall and working on a project that a number of people suggested I get in touch with you about.”

Ok, I get a lot of these. Is this some grad student or post doc who wanted to do some independent study?

The email continued,  “The problem I’m working on is that many founders are either making uninformed decisions or inefficiently learning the new skills they need. The solution I’m exploring is a just in time learning methodology that accelerates founders’ learning curve by aggregating relevant content, peers and mentors.”

Hmm, now I’m getting intrigued. This sounded like one heck of an interesting guy and it’s a subject I care about. I wondered where he got his MBA from?

The email closed by saying, “The project is a hybrid between academic and entrepreneurial circles and I’d really love to begin a dialogue with people in the academic world also interested in solving this problem. Your name has come up a lot in that regard. Let me know if this interests you and if you have any time to speak.”

It was signed Max Marmer.

I set up a meeting and at Cafe Borrone some kid who looked 18-years old came up to me and introduced himself as Max. “How old are you? I asked. “18,” he replied.

Holy sx!t.

When I asked Max why he was interested in solving entrepreneurial education problems he replied, “I was always interested in big picture trends for where the world is headed. I spent time with organizations like the Institute for the Future and Singularity University. My conjecture became that the world’s biggest problem isn’t poverty or disease or any oft-stated major problem, but that we don’t have enough people engaged in trying to solve these problems. A big piece of the solution lies in the scalable impact of entrepreneurship and an increase of successful entrepreneurs. But potential impact consistently fails to be realized because of self-destruction.”

I don’t think I touched my sandwich. I tried to remember what I was doing at 18 and whatever it was I wasn’t this. Max continued, “That’s why I’m really interested in ways of optimizing the entrepreneurship ecosystem to allow more entrepreneurs to go from idea to reality. To do this requires: a methodology, tools and systematically reducing friction.”

I was feeling pretty old. Max set the record for smarts divided by age.

Tune In, Turn On, Drop Out
Max entered Stanford in the fall of 2010 as a freshman, took as many of the engineering entrepreneurship classes as he could and independent study with me. (He was part of the Sandbox network – a group of incredibly smart under 30 year olds.)

Max dropped out of Stanford after his first quarter.

But he left to work on what he told me he came to do – crack the innovation code of Silicon Valley and share it with the rest of the world. He set up Blackbox.vc, a seed accelerator for technology startups (and one of the tour stops for entrepreneurs from around the world.) They went to work gathering deep knowledege of what makes successful Internet startups.

Max and his partners interviewed and analyzed over 650 early-stage Internet startups. Today they released the first Startup Genome Report— a 67 page in-depth analysis on what makes early-stage Internet startups successful.

Startup Genome Report
Some of their key findings:

1. Founders that learn are more successful: Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.

2. Startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.

3. Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.

4. Investors who provide hands-on help have little or no effect on the company’s operational performance. But the right mentors significantly influence a company’s performance and ability to raise money. (However, this does not mean that investors don’t have a significant effect on valuations and M&A)

5. Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.

6. Business-heavy founding teams are 6.2x more likely to successfully scale with sales driven startups than with product centric startups.

7. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.

8. Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.

9. Most successful founders are driven by impact rather than experience or money.

10. Founders overestimate the value of IP before product market fit by 255%. 

11. Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.

12. Startups that haven’t raised money over-estimate their market size by 100x and often misinterpret their market as new.

13. Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves.

14. B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the rules of business. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.

———

I’m not sure I believe every one of the report conclusions – it just covers very early stage web startups, and the methodology is still shaky – but this is a landmark study. I think these guys have gone a long way to turn hypotheses about early-stage Internet startups into facts. And they’re just getting started.

Congratulations.  A+

Download the full Startup Genome report here.

——-

I can’t wait to see what Max does by the time he’s 21.
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Filed under: Customer Development, Teaching, Venture Capital | 23 Comments »

Greatest Hits – The Gigaom Interview

Posted on May 27, 2011 by steve blank

Om Malik runs Gigaom, probably the most interesting and technically accurate sites on the blogosphere.

He had me in for an interview. We covered a wide range of topics.

0:22 – the Entrepreneurial explosion
1:45 – Are we in a Bubble?
3:20  – The Last Bubble
6:30 – Rules for the New Bubble
8:05 – Metrics for Success
10:10 – Total Available Market in the Billions
11:45 – Is this a Really a Bubble – the greater fool theory
13:00 – VC’s – The Pact With the Devil
14:10 – What to Use VC’s $’s for?
15:36 – How to Get Customer Centric – an unnatural act
17:00 – The Secrets to Social Networks – Bowling Alone
17:45 – Who Are the Best Entrepreneurs?
18:45 – Entrepreneurs are Artists
21:39 – What Makes Silicon Valley Special?
22:50 – Risk and Culture in Silicon Valley

Filed under: Customer Development, Teaching, Venture Capital | 4 Comments »

Entrepreneurs Are Artists

Posted on April 9, 2011 by steve blank

I wrote about entrepreneurs as artists in a previous post.

The FounderLy team interviewed me and got me to give a better explanation of what I was trying to say in this 2 minute video clip.

If you can’t see the video click here.

Filed under: Business Model versus Business Plan, Corporate/Gov't Innovation, Customer Development, Family/Career/Culture | 26 Comments »

The LeanLaunch Pad at Stanford – Class 4: Customer Hypotheses

Posted on April 4, 2011 by steve blank

The Stanford Lean LaunchPad class was an experiment in a new model of teaching startup entrepreneurship. This post is part four. Part one is here, two is here and three is here. Syllabus is here.

Week 4 of the class.
Last week the teams were testing their hypotheses about their Value Proposition (their company’s product or service.) This week they were testing who the customer, user, payer for the product will be (and discovering if they have a multi-sided business model, one with both buyers and sellers.) Many of them had heard the phrase “product/market fit” before, but now they were living it. And for some of the teams the halcyon days of “we’re taking this class so we can just build our great product and get credit for it” had come to a screeching halt. The news from customers was not good.

Let the real learning begin.

The Nine Teams Present
This week, our first team up was PersonalLibraries (the team that had software to help researchers manage, share and reference the thousands of papers in their personal libraries.) Going into the first four weeks their business model hypotheses looked like this:Last week we told them team: 1) see if the market size was really large enough to support a business, and 2) to find that out they were going to have to 
talk to more customers
 outside of Stanford. So during the past week, the team got feedback from >60 researchers from 
cold calls, in-person interviews, and a web survey.  (We were impressed when we found that they did the in-person interviews by hiring usertesting.com for $39 to set up test scenarios, gave the users specific tasks to accomplish with their minimum viable product, videotaped the customer interactions and summarized customer likes and dislikes.) The good news was that customers said that their minimum viable product (easily organizing research papers) was correct. The bad news was that users would play with their product on-line for a while and leave and never return.  Politely it was described as “poor customer retention” but in reality it was because the product was really hard to use.

But it was their market size survey that had the team (and us) even more concerned; last weeks “hot” market of biomed researchers looked like it was only $30m market, and the total available reference manager market was another $80M.The question was, even if they got the product right, were there enough customers to make it a business?

If you can’t see the slides above, click here.

For next week, they decided to improve the product by adding more tutorials, do a 2nd Customer Survey and begin to create demand for their product with AdWords Value Prop Testing and Landing Page A/B Testing.

The feedback from the teaching team was that customer feedback seems to be saying that this product is a “nice to have” versus “got to have.” Is the lack of excitement the MVP? Users?  Is this a hobby or a business?

Agora Cloud Services
The Agora team started the week wondering whether they were 1) a true marketplace for cloud computing, where they provide both matching and exchange capabilities for real-time trading. Or were they 2) an information exchange, providing matching services for cloud computing buyers and sellers, providing matching services.

They began with a set of questions:

  • What are our new hypothesized value propositions?
  • Which segments have we identified and which do we want to narrow in on?
  • Which value added services do public clouds want to attract customers for?
  • Is there a certain segment of buyers that continually makes purchasing decisions (as opposed to only once at the very beginning of a company).
  • How can we attract buyers to our channel before they make purchasing decisions?
  • Longer-term work/planning: what other experiments should we be constructing
  • Sales process: buyer/ user/ influencer etc.?  Demand generation?

The Agora team decided to formalize the customer discovery process by coming up with a set of Customer Discovery principles and questions that were as good as any I’ve seen.

They had 16 interviews with target customers (Zynga, Yahoo, VMware, Walmart,  Zeconder, etc.) as well as channel partners and cloud industry technology consultants.

Agora was in a classic two-sided market (having both buyers and sellers. The Business Model Canvas is a great way to diagram it out. Each side of a market has it’s own Value Proposition, Customer Segment and Revenue Model.) They learned that one their core customer hypothesis about their buyers, “startups would want to buy computing capacity on a “spot market” was wrong. Startups were actually happy with Amazon Web Services. The Agora team was beginning to believe that perhaps their ideal buyers are the companies that have to handle variable and unpredictable workloads.

If you can’t see the slides above, click here.

The Agora team left the week thinking that it was time for a Pivot: find cloud buyers and sellers who need to better predict demand.  Perhaps in market segment: medium-large companies that do 3D modeling and life sciences simulations

The feedback from the teaching team “great Pivot” and very clear Lessons Learned presentation. Keep at it.

(For the teaching team one of the most important ways to track the teams progress was through the weekly blogs we made each team keep. This of this as their on-line diary. They hated doing it, but for us it added a window into their thinking process, allowed us to monitor how much work they were doing, and more importantly let us course correct when needed.

BTW, If I was on the board of a startup with a first time CEO I might even consider asking for this in the first year as they went through Customer Discovery. Yes it takes time, but I bet it’s less than time than you would spend having coffee with an advisor each week.)

D.C. Veritas, was the team building a low cost, residential wind turbine that average homeowners could afford. From a slow start of customer interaction they made major progress in getting out for the building. This week they refined their target market by building a map of potential customers in the U.S. by modeling wind speed, energy costs, homeownership density and green energy incentives. The result was a density map of target customers. They then did face-to-face interviews with 20 customers and got data from 36 more who fit their archetype.  They also interviewed two companies – Solar City and Awea in the adjacent market (residential photovoltaic’s.)

If you can’t see the slide presentation above, click here.

The teaching team offered that unlike solar panels which work anywhere, they’ve narrowed down the geographic areas where their wind turbine was economical. We observed that their total available market was getting smaller daily. After the next week figuring out demand creation costs, they ought to see if the homeowners were still a viable target market for residential wind turbines.

Autonomow, the robot lawn mower, came in with a major Pivot. Instead of a robotic lawn mower, they were now going to focus on robotic weeding and drop mowing as a customer segment. (Once you use the Business Model Canvas to keep score of Customer Discovery a Pivot is easy to define. A Pivot is when you substantively change one or more of the Business Model Canvas boxes.)

Talking to customers convinced the team that the need for robotic weeding was high, there was a larger potential market (organic crop production is doubling every 4 years and accelerating,) and they could make organic produce more affordable (labor cost reduction of 100 to 1) – and could possibly change the organic farming industry!  And as engineers they believed weed versus crop recognition, while hard, was doable.

During the week the team drove the 160 miles round-trip to the Salinas Valley and had on-site interviews with two organic farms. They walked the fields with the farmers, hand-picked weeds with the laborers and got down into the details of the costs of brining in an organic crop.

They also talked by phone to organic farmers in Nebraska and the Santa Cruz mountains.

They acquired quantitative data by going through the 2008 Agricultural Census. Most importantly their model of the customer began to evolve.

If you can’t see the slide above, click here.

Our feedback: could they really build a robot to recognize and weeds and if so how will they kill the weeds without killing the crops?  And are farmers willing to take a risk on untested and radical ideas like robots replacing hand weeding?

The Week 4 Lecture: Customer Relationships
Our lecture this week covered Customer Relationships (a fancy phrase for how will your company create end user demand by getting, keeping and growing customers.) We pointed out that get, keep and grow customers are different for physical versus virtual channels. Then different again for direct and indirect channels. We offered some examples of what a sales funnel looked like. And we described the difference between creating demand for products that solve a problem versus those that fulfill a need.

If you can’t see the slide above, click here.

———

The biggest lesson for the students this week was the entire reason for the class – no business plan survives first contact with customers – as customers don’t behave as per theory. As smart as you are, there’s no way to predict that from inside your classroom, dorm room or cubicle. Some of the teams were coming to grips with it. Others would find reality crashing down harder a bit later.

Next week, Class 5 – each team tests its demand creation hypotheses. The web-based teams needed to have their site up and running and be driving demand to the site with real Search Engine Optimization and Marketing tests.

Listen to the post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 8 Comments »

Entrepreneurship is an Art not a Job

Posted on March 31, 2011 by steve blank

Some men see things as they are and ask why.
Others dream things that never were and ask why not.
George Bernard Shaw

Over the last decade we assumed that once we found repeatable methodologies (Agile and Customer Development, Business Model Design) to build early stage ventures, entrepreneurship would become a “science,” and anyone could do it.

I’m beginning to suspect this assumption may be wrong.

Where Did We Go Wrong?
It’s not that the tools are wrong, I think the entrepreneurship management stack is correct and has made a major contribution to reducing startup failures. Where I think we have gone wrong is the belief that anyone can use these tools equally well.

Entrepreneurship is an Art not a Job
For the sake of this analogy, think of two types of artists: composers and performers (think music composer versus members of the orchestra, playwright versus actor etc.)

Founders fit the definition of a composer: they see something no one else does. And to help them create it from nothing, they surround themselves with world-class performers. This concept of creating something that few others see – and the reality distortion field necessary to recruit the team to build it – is at the heart of what startup founders do. It is a very different skill than science, engineering, or management.

Entrepreneurial employees are the talented performers who hear the siren song of a founder’s vision. Joining a startup while it is still searching for a business model, they too see the promise of what can be and join the founder to bring the vision to life.

Founders then put in play every skill which makes them unique – tenacity, passion, agility, rapid pivots, curiosity, learning and discovery, improvisation, ability to bring order out of chaos, resilience, leadership, a reality distortion field, and a relentless focus on execution – to lead the relentless process of refining their vision and making it a reality.

Both founders and entrepreneurial employees prefer to build something from the ground up rather than join an existing company. Like jazz musicians or improv actors, they prefer to operate in a chaotic environment with multiple unknowns. They sense the general direction they’re headed in, OK with uncertainty and surprises, using the tools at hand, along with their instinct to achieve their vision. These types of people are rare, unique and crazy. They’re artists.

Tools Do Not Make The Artist
When page-layout programs came out with the Macintosh in 1984, everyone thought it was going to be the end of graphic artists and designers. “Now everyone can do design,” was the mantra. Users quickly learned how hard it was do design well (yes. it is an art) and again hired professionals. The same thing happened with the first bit-mapped word processors. We didn’t get more or better authors. Instead we ended up with poorly written documents that looked like ransom notes. Today’s equivalent is Apple’s “Garageband”. Not everyone who uses composition tools can actually write music that anyone wants to listen to.

“Well If it’s Not the Tools Then it Must Be…”
The argument goes, “Well if it’s not tools then it must be…” But examples from teaching other creative arts are not promising. Music composition has been around since the dawn of civilization yet even today the argument of what “makes” a great composer is still unsettled. Is it the process (the compositional strategies used in the compositional process?) Is it the person (achievement, musical aptitude, informal musical experiences, formal musical experiences, music self-esteem, academic grades, IQ, and gender?)  Is it the environment (parents, teachers, friends, siblings, school, society, or cultural values?) Or is it constant practice (apprenticeship, 10,000 hours of practice?)

It may be we can increase the number of founders and entrepreneurial employees, with better tools, more money, and greater education. But it’s more likely that until we truly understand how to teach creativity, their numbers are limited.

Lessons Learned

  • Founders fit the definition of an artist: they see – and create– something that no one else does
  • To help them move their vision to reality, they surround themselves with world-class performers
  • Founders and entrepreneurial employees prefer operating in a chaotic environment with multiple unknowns
  • These type of people are rare, unique and crazy
  • Not everyone is an artist

Listen to this post here: Download the Podcast here

Filed under: Corporate/Gov't Innovation, Customer Development, Family/Career/Culture | 40 Comments »

The LeanLaunch Pad at Stanford – Class 3: Value Proposition Hypotheses

Posted on March 25, 2011 by steve blank

The Stanford Lean LaunchPad class was an experiment in a new model of teaching startup entrepreneurship. This post is part three. Part one is here, two is here. Syllabus is here.

Week 3 of the class and our teams in our Stanford Lean LaunchPad class were hard at work using Customer Development to get out of the classroom and test the first key hypotheses of their business model: The Value Proposition. (Value Proposition is a ten-dollar phrase describing a company’s product or service. It’s the “what are you building and selling?”)

The Nine Teams Present
This week, our first team up was PersonalLibraries (the team that made software to help researchers manage, share and reference the thousands of papers in their personal libraries.) To test its Value Proposition, the team had face-to-face interviews with 10 current users and non-users from biomedical, neuroscience, psychology and legal fields.

What was cool was they recorded their interviews and posted them as YouTube videos. They did an online survey of 200 existing users (~5% response rate). In addition, they demoed to the paper management research group at the Stanford Intellectual Property Exchange project (a joint project between the Stanford Law School and Computer Science department to help computers understand copyright and create a marketplace for content). They met with their mentors, and refined their messaging pitch by attending a media training workshop one of our mentors held.

If you can’t see the slides above, click here.

In interviewing biomed researchers, they found one unmet need: the ability to cite materials used in experiments. This is necessary so experiments can be accurately reproduced. This was such a pain point, one scientist left a lecture he was attending to find the team and hand them an example of what the citations looked like.

The team left the week excited and wondering – is there an opportunity here to create new value in a citation tool? What if we could help scientists also bulk order supplies for experiments? Could we help manufacturers, as well, to better predict demand for their products, or perhaps to more effectively connect with purchasers?

The feedback from the teaching team was a reminder to see if the users they were talking to constitute a large enough market and had budgets to pay for the software.

Agora Cloud Services
The Agora team (offering a cloud computing “unit” that Agora will buy from multiple cloud vendors and create a marketplace for trading) had 7 face-to-face interviews with target customers, and spoke to a potential channel partner as well as two cloud industry technology consultants.

They learned that their hypothesis that large companies would want to lower IT costs by selling their excess computing capacity on a “spot market” didn’t work in the financial services market because of security concerns.  However sellers in the Telecom industries were interested if there was some type of revenue split from selling their own excess capacity.

On the buyers’ side, their hypothesis that there were buyers who were interested in reduced cloud compute infrastructure cost turned out not to be a high priority for most companies. Finally, their assumption that increased procurement flexibility for buying cloud compute cycles would be important turned out to be just a “nice to have,” not a real pain. Most companies were buying Amazon Web Services and were looking for value-added services that simplified their cloud activities.

If you can’t see the slides above, click here.

The Agora team left the week thinking that the questions going forward were:

  • žHow do we get past Amazon as the default cloud computing service provider?
  • How viable is the telecom market as a potential seller of computing cycles?
  • We need to further validate buyer & seller value propositions
  • How do we access the buyers and sellers? What sort of sales structure and salesforce does it require?
  • Who is the main buyer(s) and what are their motivations?
  • Is a buying guide/matching service a superior value proposition to marketplace?

The feedback from the teaching team was a reminder that at times you may have a product in search of a solution.

D.C. VeritasD.C. Veritas, the team that was going to build a low cost, residential wind turbine that average homeowners could afford, wanted to provide a renewable source of energy at affordable price.  They started to work out what features a minimum viable product their value proposition would have and began to cost out the first version. The Wind Turbine Minimum Viable Product would have a: Functioning turbine, Internet feedback system, energy monitoring system and have easy customer installation.

The initial Bill of Material (BOM) of the Wind Turbine Hardware Costs looked like: Inverter (1000W): $500 (plug and play), Generator (1000W): $50-100, Turbine: ~$200, Output Measurement: ~$25, Wiring: $20 = Total Material Cost: ~$800-$850

The team also went to the whiteboard and attempted a first pass at who the archetypical customer(s) might be.

To get customer feedback the team posted its first energy survey here and received 27 responses. In their first attempt at face-to-face customer interviews to test their value proposition and problem hypothesis (would people be interested in a residential wind turbine), they interviewed 13 people at the local Farmer’s Market.

If you can’t see the slide presentation above, click here.

The teaching team offered that out of 13 people they interviewed only 3 were potential customers. Therefore the amount of hard customer data they had collected was quite low and they were making decisions on a very sparse data set. We suggested (with a (2×4) that were really going to have to step up the customer interactions with a greater sense of urgency.The teaching team offered that out of 13 people they interviewed only 3 were potential customers. Therefore the amount of hard customer data they had collected was quite low and they were making decisions on a very sparse data set. We suggested (with a 2×4) that were really going to have to step up the customer interactions with a greater sense of urgency.

Autonomow
The last team up was Autonomow, the robot lawn mower. They were in the middle of trying to answer the question of  “what problem are they solving?” They were no longer sure whether they were an autonomous mowing company or an agricultural weeding company.

They spoke to 6 people with large mowing needs (golf course, Stanford grounds keeper, etc.) They traveled to the Salinas Valley and Bakersfield and interviewed 6 farmers about weeding crops. What they found is that weeding is a hugeproblem in organic farming. It was incredibly labor intensive and some fields had to be hand-weeded multiple times per year.

They left the week realizing they had a decision to make – were they a  “Mowing or Weeding” company?

If you can’t see the slide above, click here.

Our feedback: could they really build a robot to recognize and kill weeds in the field?

The Week 3 Lecture: Customers
Our lecture this week covered Customers – what/who are they?  We pointed out the difference between a user, influencer, recommender, decision maker, economic buyer and saboteur. We also described the differences between customers in Business-to-business sales versus business-to-consumer sales.  We talked about multi-sided markets and offered that not only are there multiple customers, but each customer segment has their own value proposition and revenue model.

If you can’t see the slide above, click here.

Getting Out of the Building
Five other teams presented after these four. All of them had figured out the game was outside the building, with some were coming up to speed faster than others. A few of the teams ideas still looked pretty shaky as businesses. But the teaching team held our opinions to ourselves, as we’ve learned that you can’t write off any idea too early. Usually the interesting Pivots happens later. The finish line was a ways off. Time would tell where they would all end up.

———

Next week – Class 4 each team tests their Customer Segment hypotheses (who are their customers/users/decision makers, etc.) and report the results of face-to-face customer discovery. That will be really interesting.
Listen to this post here: Download the Podcast here

Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 12 Comments »

The Democratization of Entrepreneurship

Posted on March 21, 2011 by steve blank

I gave a talk at the Stanford Graduate School of Business as part of Entrepreneurship Week on the Democratization of Entrepreneurship. The first 11 minutes or so of the talk covers the post I wrote called “When It’s Darkest, Men See the Stars.”

In it I observed that the barriers to entrepreneurship are not just being removed. In each case they’re being replaced by innovations that are speeding up each step, some by a factor of ten.

My hypotheses is that we’ll look back to this decade as the beginning of our own revolution. We may remember this as the time when scientific discoveries and technological breakthroughs were integrated into the fabric of society faster than they had ever been before. When the speed of how businesses operated changed forever. As the time when we reinvented the American economy and our Gross Domestic Product began to take off and the U.S. and the world reached a level of wealth never seen before.  It may be the dawn of a new era for a new American economy built on entrepreneurship and innovation.

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

If you’ve seen my other talks, after the first 11 minutes you can skip to ~1:04 with the Sloan versus Durant story and some interesting student Q&A. You can follow the talk along with the slides I used, below.

(If you can’t see the slide presentation above, click here.)

You can listen to this post here: You can download the Podcast here

Filed under: Corporate/Gov't Innovation, Customer Development | 12 Comments »

The LeanLaunch Pad at Stanford – Class 2: Business Model Hypotheses

Posted on March 15, 2011 by steve blank

Our new Stanford Lean LaunchPad class was an experiment in a new model of teaching startup entrepreneurship. This post is part two. Part one is here. Syllabus here.

By now the nine teams in our Stanford Lean LaunchPad Class were formed, In the four days between team formation and this class session we tasked them to:

  • 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

The Nine Teams Present
Each week every team presented a 10 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 pointed ones) for things the students missed or might want to consider next week. (These presentations counted for 30% of their grade. We graded them on a scale of 1-5, posted our grades and comments to a shared Google doc, and had our Teaching Assistant aggregate the grades and feedback to pass on to the teams.)

Our first team up was Autonomow. Their business was a robot lawn mower. Off to a running start, they not only wrote down their initial business model hypotheses but they immediately got out of the building and began interviewing prospective customers to test their three most critical assumptions in any business:
Value Proposition, Customer Segment and Channel. Their hypotheses when they first left the campus were:

  • Value Proposition:  Labor costs in mowing and weeding applications are significant, and autonomous implementation would solve the problem.
  • Customer Segment: Owners/administrators of large green spaces (golf courses, universities, etc.) would buy an autonomous mower.  Organic farmers would buy if the Return On Investment (ROI) is less than 1 year.
  • Channel: Mowing and agricultural equipment dealers

All teams kept a blog – almost like a diary – to record everything they did. Reading the Autonomow blog for the first week, you could already see their first hypotheses starting to shift: “For mowing applications, we talked to the Stanford Ground Maintenance, Stanford Golf Course supervisor for grass maintenance, a Toro distributor, and an early adopter of an autonomous lawn mower. For weeding applications, we spoke with both small and large farms. In order from smallest (40 acres) to largest (8000+ acres):  Paloutzian Farms, Rainbow Orchards, Rincon Farms, REFCO Farms, White Farms, and Bolthouse Farms.”

“We got some very interesting feedback, and overall interest in both systems,” reported the team. “Both hypotheses (mowing and weeding) passed, but with some reservations (especially from those whose jobs they would replace!)  We also got good feedback from Toro with respect to another hypothesis – selling through distributor vs. selling direct to the consumer.”

The Autonomow team summarized their findings in their first 10 minute, weekly Lesson Learned presentation to the class.

Our feedback: be careful they didn’t make this a robotics science project and instead make sure they spent more time outside the building.

If you can’t see the slide deck above, click here.

Autonomow team members:
Jorge Heraud (MS Management, 2011) Business Unit Director, Agriculture, Trimble Navigation, Director of Engineering, Trimble Navigation, MS&E (Stanford), MSEE (Stanford), BSEE (PUCP, Peru)
Lee Redden (MSME Robotics, Jun 2011) Research in haptic devices, autonomous systems and surgical robots, BSME (U Nebraska at Lincoln), Family Farms in Nebraska
Joe Bingold (MBA, Jun 2011) Head of Product Development for Naval Nuclear Propulsion Plant Control Systems, US Navy, MSME (Naval PGS), BSEE (MIT), P.E. in Control Systems
Fred Ford (MSME, Mar 2011) Senior Eng for Mechanical Systems on Military Satellites, BS Aerospace Eng (U of Michigan)
Uwe Vogt (MBA, Jun 2011) Technical Director & Co-Owner, Sideo Germany (Sub. Vogt Holding), PhD Mechanical Engineering  (FAU, Germany), MS Engineering (ETH Zurich, Switzerland

The mentors who volunteered to help this team were Sven Strohbad, Ravi Belani and George Zachary.

Personal Libraries
Our next team up was Personal Libraries which proposed to help researchers manage, share and reference the thousands of papers in their personal libraries. “We increase a researcher’s productivity with a personal reference management system that eliminates tedious tasks associated with discovering, organizing and citing their industry readings,” wrote the team. What was unique about this team was that Xu Cui, a Stanford postdoc in Neuroscience, had built the product to use for his own research. By the time he joined the class, the product was being used in over a hundred research organizations including Stanford, Harvard, Pfizer, the National Institute of Health and Peking University. The problem is that the product was free for end users and few Research institutions purchased site licenses. The goal was to figure out whether this product could become a company.

The Personal Libraries core hypotheses were:

  • We solve enough pain for researchers to drive purchase
  • Dollar size of deals is sufficient to be profitable with direct sales strategy
  • The market is large enough for a scalable business

Our feedback was that “free” and “researchers in universities” was often the null set for a profitable business.

If you can’t see the slide above, click here.

Personal Libraries Team Members
Abhishek Bhattacharyya (MSEE, Jun 2011) creator of WT-Ecommerce, an open source engine, Ex-NEC engineer
Xu Cui (Ph.D, Jun 2007 Baylor) Stanford Researcher Neuroscience, postdoc, BS biology from Peking University
Mike Dorsey (MBA/MSE, Jun 2011) B.S. in computer science, environmental engineering and middle east studies from Stanford, Austin College and the American University in Cairo
Becky Nixon (MSE, Jun 2011) BA mathematics and psychology Tulane University Ex-Director, Scion Group,
Ian Tien (MBA, Jun 2011) MS in Computer Science from Cornell, Microsoft Office Engineering Manager for SharePoint, and former product manager for SkyDrive

The mentors who volunteered to help this team were Konstantin Guericke and Bryan Stolle.

The Week 2 Lecture: Value Proposition
Our working thesis was not one we shared with the class – we proposed to teach entrepreneurship the way you would teach artists – deep theory coupled with immersive hands-on experience.

Our lecture this week covered Value Proposition – what problem will the customer pay you to solve?  What is the product and service you were offering the customer to solve that problem.

If you can’t see the slide above, click here.

Feeling Good
Seven other teams presented after the first two (we’ll highlight a few more of them in the next posts.) About half way through the teaching team started looking at each other all with the same expression – we may be on to something here.

———

Next week – Class 3 each team tests their value proposition hypotheses (their product/service)  and reports the results of face-to-face customer discovery. Stay tuned
Listen to this post here: Download this Podcast here

Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad, Teaching | 13 Comments »

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