Six Big Ideas from Stanford for Start-UpsPosted on February 12th, 2010 by Paul McArdle – 3 Comments
Some time ago, Paul Klaptocz wrote this (restricted) review of a book “Four Steps to Epiphany”, written by Steve Blank.
Out of interest, I watched through this hour-long lecture by the author, given at Stanford - in which he summarises a range of guest lectures over the year.
In the summary, he talks about the 6 Big Ideas gleaned from the various lectures:
1) Check-List for Start-Ups
Steve makes a point that I agree with – in that the leaders of the company should be continually asking questions related on the list (or, in my view, it’s far more important to be doing this on an ongoing basis than polishing answers in a DOC / PDF / WHATEVER).
There was a good point here that many of the success stories are the first fast follower, rather than the actual market leader. The key, here, was finding a good idea and executing better/smarter/etc…
2) Business Model differs by Market
Lessons learnt from companies operating with one business model may not be directly transferrable to another.
Hence, make sure you choose to learn from the right sources of information – relevant to your situation.
Because we operate in a narrow vertical market (the electricity supply industry) this means that experience in vertical markets (as opposed of horizontal markets) will be one of many factors considered for the key people we will be hiring this year:
(a) GM 3D WCW (or GM Software)
(b) GM Marketing & Sales.
3) Few Business Models survive contact with the Customer
Most start-ups go through an average of 2.3 iterations of their business model before reaching “maturity” (and even then the change continues for the good ones).
To enable the company to do this, the company must remain agile (or nimble!)
The most important aspect of agility, from this perspective, is listening to customers and acting on what they say.
Steve displays a very interesting diagram to illustrate how the two levels of questioning occur:
(a) At a tactical level, the company continually (every day) asks questions about:
i. Customer Development “the activities you do outside the building to reduce market risk”
ii. Agile Development “the activities you do inside the building, to allow engineering to constantly iterate”
(b) At a strategic level, the company periodically (every 6 months, year, or whatever) to reassess its business model.
To do this, we need to ask:
i. Who are the end-users,
ii. Who are the payers, and
iii. Who are the intermediaries.
4) Is your Start-up at Market and/or Technology Risk
It’s very important for a company to understand what its key aspects of risk.
In our case we have elements of both – though perhaps the greatest risk is Market Risk, rather than Technical Risk.
5) One Key Way to Reduce Market Risks
Because our main risks are Market Risks, the next Big Idea is directly relevant to us.
Steve Blank mentions Lean Start-ups, Agile Development and Customer Development as known techniques to reduce the market risk – which Steve Blank summarises as “Get the heck out of the Building, and Talk to the Customers”.
I’ve been doing this for the 10 year life of the company, but it is not sustainable or scalable for it just to be me – which is why we are:
(a) continuing down the Agile (nimble!) path.
(b) hiring a few key people for our bus (or galleon – ask Stephen Hurn about this metaphorical transformation).
6) Entrepreneurs are the Same Across Markets
In summary – the companies featured operated in different markets (horizontal –vs- vertical) and had very different business models and technical/market risks.
However, Steve Blank draws a final common thread – that the entrepreneurs were all similar – they all exhibited:
1) That they were comfortable with chaos and uncertainty.
If you are the above, then you might be right for our bus!
We’ll be needing a few more people (like you) on the bus over the coming months and years.
As Adrian noted, not everyone will want to be as crazy-committed as me, but a few more on the boat/bus as the company scales will help!