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  • Hear how the Lean Startup began — and helped one company find success: Episode 2 on Sirius XM Channel 111: Eric Ries and Jon Sebastiani

    Originally posted at www.steveblank.com

    By Steve Blank

    My guests eric rieson Bay Area Ventures on Wharton Business Radio on Sirius XM Channel 111 were:

    Jon Sebastiani

    • Jon Sebastiani, founder and CEO of KRAVE Jerky, a company that got its start in my class at Berkeley back in 2011 and was recently acquired by Hershey.

    The focus of our first segment with Eric was, “What is the ” and how did it start?

    Eric Ries co-founded Catalyst Recruiting while attending Yale, and continued his entrepreneurial career as a Senior Software Engineer at There.com. He later co-founded and served as CTO of IMVU and then authored The Lean Startup. Named one of BusinessWeek’s Best Young of Tech, Eric served as a venture advisor at Kleiner Perkins Caufield & Byers before moving on to advise and firms independently. He was named entrepreneur-in-residence at Harvard Business School in 2010 and is currently an IDEO Fellow.

    To listen to my entire chat with Eric, click here

    Taking My Class
    Back in 2004 when Eric and his IMVU co-founder Will Harvey approached me about investing in IMVU, I agreed on one condition – they had to take my Customer Development class at UC Berkeley Haas Business School.

    Hear Eric explain what they learned by clicking here

    Origins of the Lean Startup
    Steve: Will Harvey, the [IMVU] CEO had asked me to fund his next company … and I put a requirement on Will and you. Can you remember what that requirement was?

    Eric: …We had just lost an awful lot of Steve’s money screwing up in the worst and most publicly possible way, going off with our tails between our legs and being total failures. … And we had the audacity to go back to Steve and say, “Listen we just lost you all this money, we’re giant failures, how would you feel about funding our next startup?” … unlike most of the time this happens in , Steve had a suggestion, a very politely delivered suggestion that … he had just started teaching a class on something he that called customer development. …and he said, ‘Well if you’ll come and audit my class, then I’ll agree to be in [fund] your company.’ And at the time we thought well that’s a pretty good deal. We’ll have to waste a couple of hours a week in Steve’s class, but hey we need the money so what’s the big deal.

    Steve: And the entire world who was interested in this process consisted of me and maybe my cat.

     Eric: … So my cofounder and I would be in the car we would be arguing about all the things that would be going wrong in our startup and all the things we had to do all the way down to Steve’s class. It was like an hour and half in Bay Area traffic. We’d get there and listen to Steve’s lecture and then we would have a whole hour and a half going back to argue about now what was that thing that Steve just said and of course would couldn’t agree an hour later what it exactly was because it was so different….  I remember, Steve, that you had a line that stuck with me that first time I’ve heard it — — which is that we should have in marketing a methodology as rigorous for making decisions as we have in engineering, I couldn’t understand but I knew it was important because I lived through these startups that fundamentally failed because they had no customers. So that was the big insight of customer development, to take what had previously been a highly monolithic and faith-based initiative of marketing and turn it into a rigorous scientific approach to discover what are the facts about customers.

    Steve: And do you remember — I’m going to change your grade if you don’t — about where do the facts reside?

    Eric: All the facts reside outside the building. 

    Click the links below to hear more of Eric’s interview

    On Being the First Practitioner of Lean: “For me the challenge was how do you systematize this and turn it into a management practice that actually does not just have people pay lip service to it but really actually do it.”

    To hear the clip, click here

    On Agile Development: “We get customers involved in the development of products as soon as possible and to build everything in an experimental way so that we treat every feature, every ounce of energy that we invest in our startup as an experiment to help us understand what our customers really want.

    To hear the clip, click here

    On Failure as Experience: “I thought that I would not to be able to get a good job because I had this big stinking failure on my resume. I was flabbergasted – almost stunned — to discover that in Silicon Valley all kinds of people looked at that resume and said, ‘Hey you’ve learned a lot of important lessons on someone else’s dime.’ That’s part of the magic of Silicon Valley.”

    To hear the clip, click here

    On Getting Another Chance: “I would have paid for the privilege to work in the legendary place called Silicon Valley. I couldn’t believe this was my opportunity.

    To hear the clip, click here

    In this second segment Jon Sebastiani talks about his experience founding and developing KRAVE Jerky into one of the fastest growing consumer packaged goods in the country, and how he handled the triumphs and failures he met along the way.Jerky 2.0

    Before founding KRAVE, Jon teamed with his family to steer their Viansa Winery toward becoming one of California’s top winery destinations. He also launched 14 retail stores in 12 states that marketed and sold Viansa wines and foods, and spent a year as Managing Director of wine.com assisting in the turnaround toward its first profitable quarter.
KRAVE, which was acquired earlier this year by Hershey for >$200 million, was recently named Forbes Magazine’s Top 25 Most Innovative Companies in the US, and ranked #72 in the Inc. 500 Fastest Growing Private Companies.

    Listen to my entire chat with Jon by clicking here

    Click on the links to hear Jon discuss:

    How Entrepreneurs Are Opportunistic: “It’s a state of mind to constantly look for that area of opportunity and disruption.”

    To hear the clip, click here

    Dealing With Failure: “It was a very humbling experience. … It feels awful. It’s a very lonely feeling.”

    To hear the clip, click here

    The Idea for Krave Jerky: “This moment of serendipity came together that as I was training for the marathon, as I was eating jerky, it struck me as this vacuum of opportunity.”

    To hear the clip, click here

    When the Idea Became a Business: “We started to ask ourselves, ‘Who is our customer? Is it Whole Foods or is it 7-Eleven. Are we Wal-Mart or are we Draeger’s Supermarket?’ And it really started helping me refine my channel strategy of how we were going to roll out this business and how where we were sold really influenced the brand and the image that we wanted to create.”

    To hear the clip, click here

    When The Sale of a Lifetime and Crisis Collide: “It was an amazing serendipitous moment that we were able to get the partner, Safeway Corporation, to completely believe in the positioning of the brand and the product, and as a startup company the only way we could fulfill their PO is for them to pay us in advance so we could actually build that inventory. And it was obviously a game-changer for KRAVE. It put us on the map.”

    Kraves Check

    At the same time, the jerky manufacturer they had designed their first flavors with decided to make their own jerky. To fill Safeway’s order, “We were cold-calling anybody that we made anything to do with meat … pleading with them to consider making our products for us. “

    To hear the clip, click here

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  • Fear of Failure and Lack of Speed In a Large Corporation

    Originally posted at www.steveblank.com

    By Steve Blank

    Steve BlankI just spent a day working with Bob, the Chief Officer of a very smart large company I’ll call Acme Widgets.

    Bob summarized Acme’s impediments to innovation. “At our company we have a culture that fears failure. A failed project is considered a negative to a corporate career. As a result, few people want to start a project that might not succeed. And worse, even if someone does manage to start something new, our management structure has so many financial, legal and HR hurdles that every initiative needs to match our existing business financial metrics, processes and procedures. So we end up in “paralysis by analysis” – moving slowly to ensure we don’t make mistakes and that everyone signs off on every idea (so we can spread the collective blame if it fails). And when we do make bets, they’re small bets on incremental products or acquisitions that simply add to the bottom line.”

    Bob looked wistful, “Our founders built a company known for taking risks and moving fast. Now we’re known for “making the numbers,” living on our past successes. More agile competitors are starting to eat into our business. How can we restart our innovation culture?”

    —-

    What Drives Innovation?
    I pointed out to Bob the irony – in a large company “fear of failure” inhibits speed and risk taking while in a startup “fear of failure” drives speed and urgency.

    If we could understand the root cause of that difference, I said, we could help Acme build a system for continuous innovation.

    I suggested the best place to start the conversation is with the 21st century definition of a startup: A startup is a temporary organization designed to search for a repeatable and scalable business model.

    have finite time and resources to find product/market fit before they run out of money. Therefore trade off certainty for speed, adopting “good enough decision making” and iterating and pivoting as they fail, learn, and discover their business model.

    The corollary for a large company is: A company is a permanent organization designed to execute a repeatable and scalable business model.

    That means in their core business, large companies have a series of knowns. They’ve found product/market fit (what products customers want to buy). They’ve learned the best distribution channel to get the product from their company to the customer. They’ve figured out the revenue model (subscription, license, direct sale, etc.) and how to price the product. They know the activities, resources and partners (manufacturing, regulation, IP, supply chain, etc.) – and the costs to deliver the product/service and have well defined product development and product management tools that emphasize the linear nature of shipping products to existing customers. There are financial metrics (Return on Investment, Hurdle Rate, etc.) for new product development that emphasize immediate returns. And everyone has job titles and job descriptions that describe their role in execution.

    Why Execution and Innovation Need Different Tools, Cultures and Organizations
    Talking to Bob I realized that at Acme Widgets (and in most large companies) the word “failure” was being used to describe two very different events:

    • failure in execution of a known product in known market
    • failure in searching for innovation when there are many unknowns

    Therefore, in a large company, failure to meet a goal – revenue, product delivery, service, etc.– is a failure in execution of an individual and/or organization to perform to a known set of success criteria. In corporations the penalty for repeated failure on known tasks is being reassigned to other tasks or asked to leave the company.

    As I sat with Bob and his innovation team, I realized that all of Acme’s new product innovation initiatives were being held to the same standard as those of existing products. Acme was approaching innovation and disruptive product ideas using the same processes, procedures, schedules, and incentives within the same organizational structure and culture as its existing businesses.

    No wonder innovation at Acme had stalled.

    The Ambidextrous Organization – Execution and Innovation
    That companies should be simultaneously executing and innovating isn’t a new insight. For decades others have observed that companies needed to be ambidextrous. So while we did not lack the insight that execution and innovation need to be separate, we did lack the processes, tools, culture and organizational structures to implement it. initiatives have spent decades looking at other corporate structures as models for innovation when in fact we should have been looking at startups for innovation models – and adapting and adopting them for corporate use.

    That’s now changed. The strategy and structure for 21st corporate innovation will come from emulating the speed, urgency, agility and low-cost, rapid experimentation of startups.

    What We Now Know about Corporate Innovation
    In the last five years, as the need for continuous innovation in companies has become critical, Lean innovation methodologies (/I-Corps) have also emerged. These methods allow rapid experimentation – at startup speed – with the same rigor and discipline as traditional execution processes. Adopted by the National Science Foundation and large companies, over 1000 teams have used the process, and the resulting commercialization success speaks for itself.

    But running a inside an organization designed for execution is an exercise in futility. Working with large corporations we’ve learned that innovation groups need their own structure, culture, tools (Lean, Design Thinking, etc.), metrics (validated/invalidated hypotheses, Investment Readiness Level) and processes. And both organizations – execution and innovation – need to understand that the success of the company rests on how well they can cooperate.

    Bob’s eyes lit up as he said, “Now I understand why innovation seemed beyond our reach. We were missing four ideas:

    1. Accepting failure and running at speed are part of an innovation culture.
    2. We need to separate out innovation risks from execution risks.
    3. There are now proven Lean innovation methodologies (Lean LaunchPad/I-Corps) that we can use off the shelf in building an innovation culture without inventing our own.
    4. We need to make sure that management no longer uses execution metrics to manage and judge our innovation teams.

    Lessons Learned

    • In a startup “fear of failure” drives speed and urgency
    • In a large company “fear of failure” inhibits speed and risk
    • Innovation means experimentation in searching for a business model. Often failure is the norm not the exception.
    • Innovation processes and metrics need to be different from those of the execution organizations
    • There are proven Lean innovation methodologies that work in large existing companies
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  • Life Science Startups Rising in the UK

    Originally posted at www.steveblank.com

    By Steve Blank

    Steve BlankStephen Chambers spent 22 years in some of the most innovative companies in life science as the director of gene expression and then as a co-founder of his own company. Today he runs SynbiCITE, the UK’s consortium of 56 industrial partners and 19 Academic institutions located at Imperial College in London.

    Stephen and SynbiCITE, just launched the world’s first Lean LaunchPad for Synthetic Biology program. Here’s his story.

    —-

    Why did you come back?
    This is the question I most often hear, having now returned to the UK after leaving 24 years ago to work in the US. The answer is simple. The reason I came back is the same reason I left – to be where are happening.abbey road

    Hard to imagine now, but in the late ’80s the startup landscape in the UK was almost non-existent. One or two companies existed which at the time were described as , but in reality were government-backed small companies attempting, and ultimately failing, to execute business plans.

    At that time for any life-scientist wanting to work in the commercial sector there were few, if any, jobs in the UK. Along with the rest of British industry, the pharmaceutical sector was under going massive re-organization and mergers creating much of today’s big pharma in the process. These where the Thatcher years: when we were told to  ‘get on your bike’ and many of us did.

    I left the UK joining a newly formed startup, Vertex Pharmaceuticals in Cambridge, Massachusetts, as one of the founding scientists. There were few alternatives then, if you wanted to work in a startup you had to go to the US. Fortunately, Vertex became one of the most successful US pharma companies in recent history. But even if it hadn’t, in the rich life-science ecosystem around Cambridge and Boston, there are plenty of other opportunities. Or you could start your own company, which I did after Vertex.

    So what has changed in the UK?
    Probably the biggest change was the UK government’s recognition of the importance of synthetic biology. (Synthetic biology engineers biologically based chemicals, drugs and materials.) The government designated the field as one of the UK’s Eight Great Technologies (along with advanced materials, agri-science, big data, energy storage, regenerative medicine, robotics, and satellites) that the country would focus on. The UK invested ~ £150 million in synthetic biology research and training through the Research Councils and Innovate UK.

    To focus the national synthetic biology effort the UK created SynbiCITE, as the public-private partnership responsible for taking synthetic biology from the lab bench into commercial products in the UK.

    And this is what has drawn me back. Looking at the UK, I saw a hotbed of startup activity, especially among companies looking to exploit the latest developments in synthetic biology.

    I jumped at the opportunity to be the CEO of SynbiCITE, where I can pursue my passion of working with scientists and who want to create and build something spectacular in the UK.

    The Foundry
    SynbiCITE provides financial aid for Proof of Concept and collaborative research, and logistical support in the form of access to a state-of-the-art ‘Foundry’ for DNA synthesis, assembly and verification.

    Often the limiting step in synthetic biology is the generation of the prototype, the model or the data: the Foundry seeks to bridge the critical gap between ideation and physical product in synthetic biology. Think of it as a “maker-space” specifically designed to support the commercialization of synthetic biology allowing startups to prototype new biologically based chemicals, drugs and materials.

    The Foundry accelerates the translation of synthetic biology research into the marketplace. Small and medium-sized companies, startups or virtual companies can use the Foundry as a remote laboratory. We provide automated end-to-end design, construction and validation of synthetic biologic components. It is the generation of these parts, devices and systems, and the diversity of products they can produce and the range of functions they perform, which is creating the enormous excitement around this technology.

    Another change in the UK, is the growing acceptance that startups are the true engines of not only economic and job growth but also the medium by which innovation most efficiently takes place. While there are still universities in the UK that would rather not have to deal with messy, cash-strapped entrepreneurs and startups most are beginning to realize that licensing doesn’t create jobs, startups do.

    to Accelerate Commercialization
    The goal of our Synthetic Biology consortium is to turn our world-class scientific research into commercial products. This is why we’re excited about offering the Lean LaunchPad at SynbiCITE. Our goal is to help would-be scientist/entrepreneurs translate their ideas and research in synthetic biology into the marketplace. We want to teach them how successful startups really get built – and do it with urgency.

    If you can’t see the video click here

    The goal is to provide them a route from coming up with an idea for a product, through generation of via the Lean LaunchPad program and in parallel, harness the Foundry for the production of prototypes, models and data all the while providing evidence of commercial potential.

    The program gives those involved direct hands-on experience of identifying a product that the customer really needs and is prepared to buy. I want the participants in the program to have the excitement of finding their first customer, shipping that first product and in doing so learn about all the other aspects of building a successful business.  The Lean LaunchPad does that it in 12 weeks.

    Going forward this initial Lean LaunchPad cohort at SynbiCITE will be the first of many. The course is the most important of all the innovation programs we are providing.

    This will be the first time in the UK, scientists in the field of synthetic biology have being given the unique opportunity to learn how to become would-be entrepreneurs, by getting out of the lab, talking to potential customers and partners, and identifying what’s needed to turn science into commercial products.

    Lessons Learned

    • The UK has established a national effort in Synthetic Biology
    • The Lean LaunchPad is being used to rapidly turn science into commercial products
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  •  
  • It’s About Women Running Startups

    Originally appeared on www.steveblank.com

    By Steve Blank

    Steve BlankJust before the holidays I had coffee with Anne, an ex MBA student running a fairly large product group at a search engine company, now out trying to raise money for her own startup. She had an interesting insight: existing content/media companies were having the same problem as hardware companies that rarely made the leap to new platforms. And she had a model for a new media company for mobile and wearables. I thought we were going to talk about her product progress, so I was a bit taken aback by her most pressing question, “Why is it so hard for a woman to still get taken seriously by a venture capitalist?”

    I had lots of answers, but none of them good enough for either of us.

    I had a better one when I came back from New York.

    ——
    women-innovation at Columbia
    I was in New York last week teaching my annual 5-day version of the Lean LaunchPadclass at the Columbia Business School. We had 130 students in 30 teams who got out of the classroom and did 2154 customer interviews in 5 days – a remarkable effort for 120 hours. Their amazing Lessons Learned presentations can be seen here.

    In the last year entrepreneurship at Columbia has taken a pretty remarkable leap across the entire university. The Columbia Startup Lab is a visible symbol of how the university is making entrepreneurship an integral part of all colleges at the university.

    New York
    The Columbia Startup Lab is in a building completely taken over by WeWork – a company that provides co-working spaces in 12 cities worldwide. I wandered through four full floors of SohoWest WeWork sticking my head into the random startups’ offices.

    Looking at office after office of startups a few things stood out.

    • This was just one of the 14 WeWork co-working spaces in New York City– there are over 100 co-working spaces in New York
    • Michael Bloomberg has yet to get his due for engineering the New York entrepreneurial ecosystem
    • I was struck by something that had been slowly percolating through my head during my entire week – there are a higher percentage of women on the founding teams of New York City startups than in

    Women in New York Startups
    This last point is definitely not a data-driven survey. However after spending a week teaching 130 entrepreneurship students, ~35% of them women, and then walking through ~100+ WeWork and TechSpace offices in New York, I get the impression that the number of women leading startups in New York is much higher than in the San Francisco Bay area.

    When I mentioned this to my friends running the and Columbia entrepreneurship programs, they looked at me like I just discovered that it gets dark at night. Their answer seemed to make sense: a higher percentage of startups in New York are focused on media, fashion, communications, real estate, financial tools – all the products of industries centered in NYC – and all are attempting to disrupt them with products that run on and are delivered by 21st century platforms. (Think of what Refinery29 is doing to Conde Nast.)

    These are industries where women have had a history of leadership positions and more importantly, where young women can find role models and mentors as their male counterparts do in Silicon Valley’s tech-centered, pay-it-forward culture.

    This raises an interesting question: is the credibility of female entrepreneurs in the eyes of New York VC’s something about the venture firms, or is it about the industries they are funding?

    One can make the case that New York industry is rooted in the 21stcentury not the 20th. While some venture firms have been around for awhile, perhaps the newer partners have a different model of what a successful founder looks like than their west coast peers.

    Or perhaps it’s as simple as New York VC’s are funding startups that play on the disruption of New York’s key strengths in Media, Fashion, Finance and Real Estate, and the women founding New York startups have an existing track record in those industries, and pass a gender neutral “VC credibility” bar.

    Correlation does not imply causation
    Those bemoaning the dearth of women founders in Silicon Valley might want to see if there is a real disparity between the coasts or if it is just my selection bias?

    If it’s real why?

    • Women founders already had leadership roles in the industries they’re about to disrupt?
    • Women can find existing role models?
    • Women have built a network of women mentors?

    What role does the type of startup play?

    • Companies that get started and built in New York City tend to be applied technology
    • Companies that get started and built in Silicon Valley have historically focused on core technology

    What role does venture capital play?

    • Is there any difference in funding women for old-line firms versus 21st century firms?
    • What role does industry segment play? (i.e. lots more women founders in media companies than you find in enterprise software companies.)
    • On the West Coast the history of successful startups is technology first, and perhaps VC’s weigh that more in what they want to see in founders.
    • Is it as simple as having credibility in the industry you want to startup in?

    —–

    I sent Anne, my student, an email when I returned, “You may want to take a trip to NY and pitch some of their VCs.”

    Lessons Learned

    • Lots of entrepreneurial activity in NY
    • Different industry focus than in Silicon Valley – more media, finance, real estate
    • Women seem to be more represented as founders
    • If a NY bias toward women as founders is true, why? And what are the lessons for Silicon Valley?
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  • The Big Bang. The Lean LaunchPad explodes at University of Maryland

    The is now integrating the ® into standard innovation and courses across all 12 colleges within the University. Over 44 classes have embedded the and/or Customer Discovery including a year-long course taken by every single one of its bioengineering majors.big bang 2

    It’s made a big bang.

    Here’s the story from Dean Chang, UMD’s Associate Vice President for Innovation and Entrepreneurship.

    ———————————————–

    Two decades ago, Steve Blank completely changed the course and fortunes of a Stanford spinout startup called Immersion. I was lucky to be one of the very early people at Immersion and met Steve when he came on as one of our first board members. It was Steve who first brought Will Harvey to visit Immersion, which led to a strategic investment in There.com, Will’s stealth-mode but sure-fire, can’t-miss startup.

    Present at the Creation
    We didn’t know it at the time, but with that investment we had paid for front-row VIP seats to witness the origins of and the . There.com is where Will first met and hired Eric Ries and had the painful and formative experiences that directly led to them starting over and co-founding IMVU while auditing Steve’s Lean LaunchPad course. With Eric Ries as the first practioner of Customer Development, Steve wrote Four Steps to the Epiphany, Eric wrote Lean Startup, and – BANG – Customer Development and Lean Startup were born!

    Twenty years and 100,000’s of copies of those books later, my life has fortuitously intersected with Steve Blank once again now that we’ve both become educators. In my second go-around with Steve Blank, he’s still changing the course and fortunes of everywhere, but perhaps more profoundly, he’s now also changing the course of universities and students everywhere as a result of a program he developed with the National Science Foundation (NSF).

    It’s a Capitol Idea
    The DC, Maryland, and Virginia (DMV) region represents the most fertile science and technology region in the country with about $30 billion in federally-funded R&D. However, the region has historically underperformed in translating its enormous R&D output into impact.

    When Steve and NSF created the I-Corps™ program in 2011, I approached Edmund Pendleton from University of Maryland, Jim Chung from George Washington University and Jack Lesko from Virginia Tech with the idea that together we could leverage the respective strengths of our institutions, and catalyze the region through I-Corps. In 2012, we applied for and then were awarded a grant from NSF to do just that. We created the DC I-Corps Regional Node to teach the Lean LaunchPad curriculum to top scientists, innovators, and students from around the country and from our region. Since 2013, DC I-Corps has trained over 150 teams with the kind of impact NSF and Steve envisioned when they launched the program. That impact is now accelerating with the DC I-Corps node’s addition of the #1 research university in the country (Johns Hopkins) in 2014.

    UMD LLP Ecosystem

    Teaching the Big Bang to Undergraduates
    University of Maryland’s President Wallace Loh’s commitment to engage every student in all 12 colleges in innovation and entrepreneurship resulted in UMD aggressively leveraging its I-Corps and Lean LaunchPad experience inside undergraduate classrooms.

    Our FedTech class pairs students with some of the most promising technologies from NASA, DOD and several other of the 87 federal labs located in the DMV region. Federal labs like DOE literally have tens of thousands of inventions that they’d like to have vetted for commercial potential, so FedTech students search for a repeatable and scalable business model for those fed lab technologies using the Lean LaunchPad framework. Students get course credit, a fantastic learning experience, and in some cases, even a job offer or career opportunity with the federal lab or with an industry contact made during interviews.

    Elements of the business model canvas and/or discovery-based interviews of stakeholders have already been incorporated into 44 other classes at UMD. But the biggest impact of 2014 has been from incorporating the Lean LaunchPad curriculum into our signature, year-long senior capstone course in bioengineering. This means that every single University of Maryland student in the Fischell Department of Bioengineering is now required to not only design a real biomedical device but also take that design through rigorous, evidence-based Customer Development in order to graduate. 

    Truth be told, we took a page out of Frank Rimalovski’s playbook at NYU and paid for Yang Tao to attend the Lean LaunchPad Educators Program.  He’s the professor who teaches the bioengineering capstone course, and he returned from Steve’s ranch inspired and determined to weave the Lean LaunchPad into the fabric of the capstone course. So what’s happened so far?

    Impact of the Big Bang on University of Maryland Bioengineering
    In this capstone course students visit the University of Maryland medical school and shadow doctors, nurses, and other hospital workers to learn about problems and needs, which is an ideal set up for customer interviews and discovery. They spend the year working with the doctors and the venture community to design devices and other solutions to those problems and needs.

    Before Lean LaunchPad was added to the bioengineering capstone class, some beautiful devices were designed and manufactured with many students never knowing whether the value proposition for what they made was beneficial enough to all the right people to warrant adoption or if the customer segment they targeted was the right one and made financial sense.

    Now the students spend time in customer discovery and learn why validating the business model for their device is so important. As they target the different parts of the canvas, they begin to understand how things like improved healthcare, purchasing, reimbursement, and regulatory must fit into a successful business model.

    Some students will find that their device is an engineering marvel but would never fly in the market for reasons they weren’t even aware of until they did their “outside of the classroom” customer interviews. Co-instructor Martha Connolly thinks that’s a perfectly good outcome because they’ve still learned the process of designing and making a biomedical device but they’ve also learned equally valuable lessons from the Lean LaunchPad process that will be applicable in any future endeavors, whatever they may be.

    The real proof of Lean LaunchPad’s impact is that the students are clamoring for it.

    Can I Have More?
    In fact, two UMD bioengineering students, Shawn Greenspan and Stephanie Cohen, went through the capstone course last year before Lean LaunchPad was integrated. They were so upset that they missed out on the Lean LaunchPad version of the course that they teamed up with Dr. Ron Samet, a very entrepreneurial professor of anesthesiology from the medical school, to take the class through this fall’s National Science Foundation I-Corps regional program taught in the D.C. area.

    UMDAccording to Shawn and Stephanie, I-Corps taught them what they didn’t get from the traditional capstone course without Lean LaunchPad:

    “I-Corps finally put us on the road to real customer discovery. Our initial business plan started with an incorrectly identified buyer, value propositions that were wrong, and guesses everywhere else. Fortunately after 67 interviews we now have a fully developed customer segment identifying each customer type, the key value propositions, and a developing revenue model.

    We still have lots of work to do. The left side of our canvas has more questions than answers. Five weeks ago, that was scary to admit, but now we know where our answers lie: outside the building.”

    This kind of feedback from students is particularly gratifying. Not only did the experience have the kind of impact we had hoped for, but it’s also turned into a potential career opportunity for Shawn and Stephanie as they’re completing their master’s programs.

    What’s Next?
    Four more Lean LaunchPad initiatives are either on tap or about to be scaled up:

    Being a node instructor in the I-Corps @ NIH program has allowed me to work with some terrific experts in life sciences and healthcare ventures and spread that expertise to DC I-Corps and UMD programs. Next month, I’ll be a node instructor in NSF’s upcoming I-Corps for Learning program where we aim to teach STEM educators how to scale their teaching innovations to a wider audience. That experience should again result in great learnings to bring back and apply at UMD.

    When I witnessed the Big Bang origins of Customer Development and Lean Startup 20 years ago during my first encounter with Steve Blank, I could not have guessed how fast it would impact the startup world, and now universities and students. If the past is prologue, the future is going to be fantastic!

    Lessons Learned

    • University of Maryland has gone “all in” with the National Science Foundation Innovation Corps and discovery-based learning from stakeholders
    • I-Corps has been a great investment for the country. Regardless if they take startup path, students gain invaluable skills
    • Elective courses are great, but the big win comes from embedding Lean LaunchPad in existing required courses
    • Students can create job and career opportunities through their customer discovery interactions
    • The impact on life sciences and healthcare is evident in the UMD bioengineering program and in the NIH program
    • The Lean LaunchPad process is equally well-suited to areas like STEM education and government (e.g., fed labs, HHS)
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  • Impact! NYU Scales the Lean LaunchPad

    Steve BlankOriginally posted at www.steveblank.com

    By Steve Blank

    has adopted the ® class as a standard course across twelve different schools/colleges within the University. Over 1,000 students a year are learning concepts.

    Impact!shutterstock_132023192

    —–

    In August 2011 I received an email from someone at NYU I never heard of. Frank Rimalovski, the Executive Director of the NYU Entrepreneurial Institute, had just read about the National Science Foundation Innovation Corps (I-Corps) in my blog, and he absolutely had to meet me. To Frank’s credit he wouldn’t take no for an answer. When I said, “I’m too busy,” Frank said he’d fly out to fit into my schedule. When I said, “I’m at my ranch on the coast,” Frank promised to drive to Santa Cruz as soon as he get off the plane.

    I figured any academic who was as persistent as an had earned my time.

    So we met, and I learned a lot. First, I learned that Frank was not your typical academic. He was a career VC, now at NYU and charged with building an entrepreneurial ecosystem across the university. Frank’s goal in the meeting was to figure out how to ensure that NYU would be one of the new universities selected when the National Science Foundation scaled the Innovation Corps nationally. (The Corps, or I-Corps for short, is my Stanford Lean LaunchPad class offered by the National Science Foundation to our leading scientists. The Lean LaunchPad class teaches students how to build a Lean Startup using business model design, and agile engineering. Teams have to get out of the building and talk to 10-15 customers a week.) I gave Frank the same advice I offered all the other universities who asked. But the difference was that Frank took it and made it part of the NYU proposal.

    In 2012 NYU partnered with the City University of NY (CUNY) and Columbia University, and in early 2013 they won a grant from the National Science Foundation to build the Innovation Corps in New York City and jointly create the the NYC Regional Innovation Node (NYCRIN).

    Spend it Wisely
    As part of the National Science Foundation I-Corps program, NYU was responsible for training our country’s top scientists – and they’ve taught 170 of them so far.

    But what NYU did with the rest of their grant dollars was simply brilliant. Over the last two years they used part of the National Science Foundation funds to send eight NYU faculty to California attend the Lean LaunchPad Educators program. (The Educators Program is a 2½ day class that teaches faculty how to create and teach their own Lean LaunchPad class.) In exchange the faculty had to agree to teach a Lean LaunchPad class at NYU within the next year. Unbelievably, they’ve delivered – and more. By this spring there will be 9 different Lean LaunchPad classes with 12 NYU instructors (and several more gearing up) teaching Lean at 12 of the schools/colleges within NYU. Some of these were brand new classes while others adapted existing business, design and engineering curricula to utilize the Lean approach.

    NYU Lean 2

    Spread it Widely
    In two short years, the Lean LaunchPad has had a major impact on at NYU. Starting this year all 750 incoming freshman at the NYU Polytechnic School of Engineering take the required Innovation and Technology Forumclass. The class has been updated to cover the key elements of the Lean Startup (customer development, customer segments & value propositions, product/market fit, and minimal viable products)!

    In addition, 165 students from twelve different schools/colleges within the University took the full Lean LaunchPad class this year. And in each of the past two summers 10 teams with 30 students participated in the NYU Summer Launchpad accelerator program. Frank even convinced me to come to New York and teach a five-day 10-hour-a-day Lean LaunchPad class with him and his team each August.

    Student Impact
    While classes offered and curriculums built are impressive, what really matters is whether we had any impact on the students. Did we open new eyes? Encourage new ? Change lives? To my surprise the impact has been clear and immediate. A few of the students wrote blogs about their experience in the classes.  Here are a a few quotes that stand out:

    Tlacael Esparza recently received his masters in music tech from NYU Steinhardt and is the co-founder of Sensory Percussion.  “…I found the idea of doing 10-15 customer interviews a week daunting and distracting. How can I commit to “getting out of the building” when I have so much more work to do building and improving our first product? … However, going through the customer development process showed me the danger in that kind of thinking. In talking to musicians and music producers…there was a lot to be learned about how our competitors’ products are perceived and used and how Sensory Percussion would fit into the current eco-system.” Read Tlacael’s blog post about his Summer Launchpad experience here.

    Fang-Ke Huang is a postdoctoral fellow in NYU Langone Medical Center, applying the proteomic approach to understand the brain’s functionalities such as learning and memory.  “(The) class taught me not only the importance of customers, but also the application of the scientific method to the business model...I also learned that an entrepreneur should have a productive attitude towards setbacks. …, I started to view setbacks as a chance for feedback and as opportunities to redirect my efforts.”  Fang-Ke’s blog about the class is here.

    Make it Better
    Last but not least, Frank thought that neither the Four Steps to the Epiphany nor the Startup Owners Manual had enough specific advice on Customer Development. (Ouch.) I told him that if he thought he could do better he should write his own book. So Frank did. He collaborated with Giff Constable and wrote Talking to Humans: Success Starts with Understanding Your Customers to guide aspiring through the process of securing, conducting and synthesizing early customer discovery interviews. And you know what? It is a great book. I used it in the I-Corps @ NIH program, and it’s now one of my class texts.

    What’s Next?
    From my time at NYU last summer, it was clear there is already a growing demand and interest from faculty and administrators alike to apply Lean in life science and healthcare at NYU. Now that the National Institute of Health has run an I-Corps class specifically targeted for Life Science and Healthcare (therapeutics, diagnostics, medical devices and digital health), there’s now a Lean LaunchPad curriculum for Frank’s next target –  bringing the Lean LaunchPad class into the NYU Medical Center in 2015

    Lessons Learned

    • The National Science Foundation Innovation Corps has been a great investment for the country
    • It’s spurred a renaissance in
    • NYU has grabbed the opportunity with both hands
    • They’ve made one heck of an impact in just two years
    • I can’t wait to see what they do next
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  • Why Corporate Skunk Works Need to Die

     

    Steve BlankOriginally posted at www.steveblank.com

    By Steve Blank

    In the 20th century corporate skunk works® were used to develop disruptive separate from the rest of the company. They were the hallmark of innovative corporations.

    By the middle of the 21st century the only companies with skunk works will be the ones that have failed to master continuous innovation. Skunk works will be the signposts of companies that will be left behind.

    ——–

    In the 20th century companies could be leaders in a market for decades by just focusing on their core product(s). Most companies incrementally improved their products withprocess innovation (better materials, cheaper, product line extensions) and/or through acquisitions. Building disruptive products were thought of as “risky” and a distraction since it was not “core” to the company and did not fit existing corporate structures. Why make big bets if no one was asking for them and competitors weren’t doing so.

    a-12

    A few innovative companies did push the envelope. The way they did so was to set up “skunk works” to develop their most advanced, disruptive products. (IBM used the process to develop the IBM PC.) But it was Lockheed, then an aircraft manufacturer that coined the term and perfected the art. The Lockheed Skunk Works led by Kelly Johnson was responsible for its Advanced Development Projects – everything from the P-80, the first U.S. jet fighter plane, to the U-2 and A-12 spy planes.

    Skunk works differed from advanced research groups in that they were more than just product development groups. They had direct interaction with customers and controlled a sales channel which allowed them to negotiate their own deals with customers.

    Decades before we were able to articulate the value of “getting out of the building” and the , the value in having skunk works controlling their own distribution was starkly evident. Other companies with world-class R&D groups built radical innovations only to see their company fumble the future and others reap the rewards (think of Xerox and the personal computer, Fairchild and integrated circuits, Kodak and digital photography, etc.) Common themes in these failures were, 1) without a direct connection to the customer advanced R&D groups built products without understanding user needs, and 2) the core of the company was so focused on execution of current products that it couldn’t see that the future didn’t look like the past.

    Kelly Johnson’s 14 rules about how to manage a disruptive project described how to remove a small innovative team from the politics, policies, procedures and processes a large company had built to support execution of its core business (and its military customers had developed to procure large numbers of standard aircraft.)

    With the vantage point of the 21st century, we can now see that a successful skunk works – separated from its corporate parent, with its own culture, in control of its own R&D and distribution channel – looked much like a startup.

    But as successful as skunks works were to the companies that executed them well, innovation and execution couldn’t co-exist in the same corporate structure. Skunk works were emblematic of corporate structures that focused on execution and devalued innovation.

    Until now.

    Continuous Disruption Requires Continuous Innovation
    In the 21st century market share is ephemeral – ask General Motors, Blackberry, Nokia, Microsoft, Blockbuster, etc. –disruption is continual.

    Therefore companies need to master continuous innovation – the art of executing on core products while continually inventing new products and new businesses. That means that somehow we need to take the innovation that a skunk works removed from the core of the company and integrate the two.

    Here’s how.

    We need to realize that skunk works epitomize innovation by exception. But to survive companies need innovation by design.

    We now know how to do just that. We can get innovation and execution to work side-by-side.

    To start it requires board support and CEO and executive staff agreement. And recognition that cultural, process and procedure changes are needed to embrace learning and experimentation alongside the existing culture of execution.

    I’ll provide details on how companies can organize this way in a follow-on post.

    Lessons Learned

    • Skunk were advanced/disruptive product groups organizational isolated from the rest of their company
    • Skunk works had control over their sales channel and had direct customer feedback
    • World-class R&D groups that didn’t control the channel often saw their innovation die internally
    • Skunk works looked much like a startup
    • Skunk works epitomized innovation by exception
    • Companies now need innovation by design – innovation and execution that work side-by-side
    • We now know how to do this
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  • Born Global or Die Local – Building a Regional Startup Playbook

    Originally posted at www.steveblank.com

    By Steve Blank

    is everywhere, but everywhere isn’t a level playing field. What’s the playbook for your region or country to make it so?

    playbook

    ———-

    Scalable startups are on a trajectory for a billion dollar market cap. They grow into companies that define an industry and create jobs.  Not all start ups want to go in that direction – some will opt instead to become a small business. There’s nothing wrong with a business that supports you and perhaps an extended family. But if you want to build a scalable startup you need to be asking how you can you get enough customers/users/payers to build a business that can grow revenues past several $100M/year.

    With 317 million people the U.S. has a large enough market that most U.S. ignore the rest of the world until they scale in their own country. Outside the U.S. a rough rule of thumb for scale is a local population greater than 100 million (and language, cultural and/or regulatory barriers to delay or keep out U.S. entrants.) China, Russia, Brazil, India, Indonesia all meet those criteria. (Obviously this depends on industry and application.) However, most countries don’t have sufficient population to support scale with just their local market and ultimately need to be global players – from day one.

    Regional Ecosystems
    I’m in Australia and just spent time with some great in Melbourne.

    Bay of Fires Tasmania

    One of the groups I spoke to was the Australian Sports Technology Network. This group realized that Australia has a great reputation as one of the world’s best sporting nations. They realized if they could develop and promote a well-coordinated sports technologies industry, they could capture their unfair share of the $300 billon sports consumer market. So they put together a sports technology ecosystem – gathering sports startups in apparel and footwear, protective wear, equipment, nutrition, wearable devices, data and video analytics, and web and mobile solutions and brought them together with investors, retailers and distributors, universities, research centers and national sporting organizations.

    Creating a vertically oriented regional ecosystem is a pretty amazing accomplishment for any country or industry.

    However, in meeting some of the sports startups one of the things that struck me is that most of the founders who said they wanted to grow big hadn’t given much thought about how they would go about building size and scale.

    The trap most of them fell into (common almost everywhere): they were reading the blog posts and advice of -based companies and believing that it uniformly applied to them.

    It doesn’t.

    Born Global or Die Local
    The biggest mistake for most of these startups was not understanding that optimizing their business model for the 24 million people in the Australian market would not prepare them for the size and scale they needed to get to big.

    Instead of beginning with just a focus on Australia, these startups needed to use the and articulate which of their hypotheses should be tested locally and what would require getting on an airplane to test by watching someone’s pupils dilate face-to-face.

    For example, one of the critical business model hypotheses they could test locally is Product/Market fit – the connection between their Value Proposition (what product or service they were building) and the Customer Segment (who they were building it for.)

    business model globals

    Further refinement of Product/Market fit could be done locally by using Value Proposition Design.

    bus model and value prop map

    value prop map

    But other critical hypotheses such as activities, resources, partners, channels needed testing offshore. For example, many of the Australian sports tech business models shared common elements. They intended to get scale for their business by growing in the U.S. while building their products in China. And their branding and demand creation activities were going to occur primarily outside of Australia. This meant they would need U.S. channel partners and Chinese manufacturers and customer acquisition and activation programs outside their home country. And as good as the Australian angel investors have been, there still is dearth of serious follow-on funding in Australia. This means that most follow-on rounds of tens of millions of dollars, if needed will likely come from outside the country.

    Step 2 figure out what needs to be tested globallys

    While the network was very helpful getting these startups together and introduced to investors, it wasn’t clear how and when these startups tested their “going global” hypotheses.

    No one had written the playbook.

    Building a Regional Startup Playbook
    What’s been missing from regions outside of Silicon Valley is a “playbook.” In American football a playbook contains a sports team’s strategies and plays. It struck me that every region needs its own industry playbook on how to compete globally. For Australian sports startups, a playbook might lay out in detail the following steps:

    • Build minimal viable products and test product/market fit in Australia
    • Identify activities/resources/partners locally and then globally
    • Get seed funding in Australia
    • Trip 1 to China to understand manufacturing landscape, potential partners and rough cost of goods
    • Trip 2 to the U.S. to understand distribution channel landscape, potential partners and rough cost of customer acquisition
    • Test product/market fit in the U.S.
    • Trip 3 to China, pick manufacturing partner, start low volume production
    • Test channel and demand creation activities in the U.S.
    • Trip 4 to the U.S. Establish U.S. sales office
    • Trip 5 to the U.S. to get Series A funding in the U.S.

    Each industry in a region should develop a playbook that expands and details the strategy and tactics of how to build a scalable startup. When a playbook is shared through regional collaborations (like the Australian Sports Tech Network) entrepreneurs can jumpstart their efforts by sharing experience instead of inventing the wheel each time a new startup is launched. Now all they need is a playbook. As markets mature, and investors and the ecosystem become collectively smarter, the playbook will change over time.

    Lessons Learned

    • A scalable startup typically requires a local population >100 million people
    • If your country doesn’t have that you need to be born global
    • Your country/industry needs a “go global” playbook
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  • The Business Model Canvas Gets Even Better – Value Proposition Design

    Originally posted at www.steveblank.com

    By Steve Blank

    Steve BlankProduct/Market fit now has its own book. Alexander Osterwalder wrote it. Buy it.

    ——

    The Lean Startup process builds new ventures more efficiently. It has three parts: a to frame hypotheses, to get out of the building to test those hypotheses and agile engineering to build minimum viable products.

    This week the author of the business model canvas, my friend Alexander Osterwalder, launched his new book Value Proposition Design, the sequel to his million copy best seller, Business Model Generation.

    His new book does three things:
    1. Introduces the Value Proposition Canvas
    2. Tells you how to design new ventures with it
    3. Teaches you how to use Customer Development to test it.

    Value Proposition Design is a “must have” for anyone creating a new venture. It captures the core issues around understanding and finding  customer problems and designing and validating potential solutions.

    Value prop design

    Product/Market Fit
    If you’re familiar with the you know that the Business Model Canvas is the tool to frame all the hypotheses of your startup. Of all the 9 boxes of the canvas, the two most important parts of the business model are the relationship between the Value Proposition (what you’re building) and the Customer Segment. These two components of the business model are so important we give them their own name, “Product/Market Fit.”

    The Value Proposition Canvas functions like a plug-in to the Business Model Canvas and zooms into the value proposition and customer segment to describe the interactions between customers and product more explicitly and in more detail. This keeps things simple by giving you the big picture at the business model level and the detailed picture at the “product/market fit” level.

    bus model and value prop mapvalue prop map

    Integration with Customer Development and Lean Startup
    Alexander and I met after he published Business Model Generation. We both realized that we had each invented one of the two parts that define the Lean Startup. In his new book he’s integrated Customer Development with the Business Model and Value Proposition Canvas and added some new tools to the mix.

    Now an integral part of Value Proposition Design, several of his new tools help with testing and validation of hypotheses. These testing tools match the first two of the four steps of Customer Development. The diagram below is one of my favorites of the book and provides a simple overview of how to conduct customer discovery and customer validation in combination with the Business Model and Value Proposition Canvas. You start by extracting and prioritizing your hypotheses, then design your tests with Test Cards and finally, you conduct your tests and capture your learning. To make this all actionable Osterwalder added an Experiment Library to the book that equips you with ideas on how to test your assumptions.

    3_Value_Proposition_Design_Testing_Process

    Tracking Customer Development with the Value Proposition Canvas
    With Customer Development you’re constantly talking to customers and partners and conducting a ton of experiments to validate and invalidate your hypotheses. All these activities, the evidence of what works and what doesn’t, and your progress towards finding a successful value proposition and business model need to be tracked. In Value Proposition Design Osterwalder shows how to do this with the Progress Board, a tool that includes a version of my investment readiness level thermometer to track progress.

    5_Value_Proposition_Design_Progress_Board

    Online Tools
    Doing all the above together with your team is not easy when you “just” use poster-sized Canvases, sticky notes, and PowerPoint. There are simply too many Canvases you will design and trash (after rejecting and pivoting from your early tested ones), too many experiments you will conduct, and too much evidence you will produce. Keeping track of all this requires software support.

    So the Value Proposition Design comes with a series of exercises that you can complete online with assessment tools that show you how you are using the Value Proposition Canvas. And last, but not least, you get access to a whole series of checklists, templates, and incredibly awesome posters that you can immediately use in your work.

    Lessons Learned

    • The Value Proposition Canvas describes the details of how the value proposition and customer segments interact
    • It integrates the Customer Development process in the book
    • Product/Market fit now has its own book. Buy it
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