Last week, Steve Blank sat down with Kevin O’Connor, the CEO of FindTheBest, for a fireside chat at the FindTheBest office. For those of you who are not familiar with this pair of entrepreneurs, Steve is a serial entrepreneur from Silicon Valley who has been involved in launching eight technology companies. After his success in the tech world, Steve turned his focus towards writing and teaching.
He wrote The Four Steps to the Epiphany, a book that introduced the Lean Startup approach and the idea that new ventures are not smaller visions of large companies, but separate entities all together that require different strategies and approaches to success. Steve is also a professor at Stanford, UC Berkeley, and Columbia, where he shares his views of entrepreneurship with undergraduate and graduate students.
Similar to Steve, Kevin is a serial entrepreneur and author. He has been involved in a variety of technology companies, including co-founding DoubleClick, which was acquired by Google in 2007 for $3.1 billion. He is also the co-author of The Map of Innovation: Creating Something out of Nothing. Kevin is currently the CEO at FindTheBest, a research hub that equips people with the best information and research tools they need to think like experts.
During the chat at the FindTheBest office, the two entrepreneurs discussed a variety of topics, but primarily focused on developing early stage companies. Each shared stories from their unique experiences and the insight that came with them. It was interesting to see how location (Silicon Valley vs. Silicon Alley) influenced the growth of their companies and how the methods for developing companies has evolved over their careers and continues to evolve today.
Throughout the talk, Steve made it clear that when he started his career as an entrepreneur, most startups approached business planning with a counterintuitive mindset. He said that startups would try to imitate the strategies of large corporations when it came to a variety of practices, such as market research or forecasting sales. Steve realized this approach didn’t work for young startups because projections rarely correlated with the actual results. After many years of frustration, he envisioned an improved strategy for developing early stage companies called the Lean Startup method.
Principles of the Lean Startup Method
Business Model Canvas
One of the biggest differences between startups and large corporations is that corporations have an understanding of the markets in which they compete. They know who their customers are, startups do not. The most successful startups are the ones that create new markets or exploit a disjoint in an existing market. Because of the novelty of most startups’ proposed markets, Blank believes it is ludicrous for a startup to employ the same research methods that corporations use, and then formulate a business plan from this research.
Instead, he recommended that startups use the Business Model Canvas. The Business Model Canvas is a series of hypotheses regarding all aspects of the company’s operations. As the company develops, these hypotheses are tested and the canvas adapts to be more pertinent to the company’s purpose.
In order to test these hypotheses, startups have to gather customer feedback on all aspects of the business. This process is referred to as Customer Development and requires what Steve refers to as “getting out of the office” and seeing how the rest of the world views your business model. From this feedback, startups can modify the Business Model Canvas to be more strategic.
Agile Development (Pivot)
In order for the Lean Startup method to work, startups have to be extremely agile when it comes to making changes. Because many of the hypotheses that comprise the Business Model Canvas will likely be disproven, the ability to make rapid changes is crucial. Therefore, rather than putting products through year-long testing phases, Blank suggests that startups develop a minimum viable product (MVP) and get it to market as soon as possible. This approach will accelerate the testing phases because startups can continually make changes to the MVP as they produce it. This also allows startups to make the necessary changes to the MVP before it becomes too costly.
The ability to think differently is what sets entrepreneurs apart from the rest of the herd. For successful entrepreneurs, this mindset applies to all aspects of a business, especially when it comes to drafting a business plan. Thanks to Steve Blank, entrepreneurs now have a more concrete starting point from which they can develop their startup’s unique business plan.