Monday, November 18, 2013

Steve Blank Rethinks Entrepreneurship

The following are my notes and {thoughts}

From The Four Steps to the Epiphany, to The Startup Owner's Manual. What we learned in business school in the last 40 years is wrong vis-à-vis startups. Startups aren’t small versions of big companies. Big companies execute their business models. Startups are searching for their business models, that is, something that is repeatable and scalable {cf. Paul Graham, who advised entrepreneurs to do something that doesn't scale}. They’re searching for a lot of things. Business plans à la investors are a hallucination. A series of declarative paragraphs and spreadsheets. If you’re blessed enough to get funded, then you have to do what you said you were going to do. But the reality is no business plan survives the first iteration. Entrepreneurs come up with an idea, instead, and try it out, and fundamentally go from failure to failure. Startups don’t execute a business plan, but search for success and learn by going from failure to failure. Eric Ries calls failures pivots. Testing our hypothesis. What should entrepreneurs look for in a business book? Biographies of Steve Jobs offer little or no actionable items for entrepreneurs. You cannot live his biography. {True, you have to extract the algorithms, that is, you have to distill the essence of what he did and what he said.}  

Before you do the business plan, you have to go out and rub elbows with customers. What is the role of the VC? It depends on where you are, and what they fund (e.g., pivoting or growing).

Steve Jobs’ product instinct was unparalleled (cf. Edward Land, Walt Disney). He was the intersection of art and science. Jobs would go to an Apple store. He would answer a customer e-mail a month. He was intimately connected with what was going around him. Not talking to customers was about new markets.  (a) Startups → existing markets, with something better or faster. (b) Startups → existing markets, with segmented strategy rather than head-to-head with big players. (c) Startups → non-existent markets, with a new vision. What will change in their lives? What will happen, if I change the ecosystem? What is it I can develop that no one else can? iPod, iPhone, iPad. That’s special. The intersection of art and science.

Computing has become a utility {cf. electricity, water and gas}.  Amazon now offers web services. The laptop is the local machine. We no longer need the big mainframe or the big machine with fan belts. Amazon has transformed our ability to launch 1000s of startups.

The issue today is the volume of information, but you lack a roadmap. Advice can be had everywhere. Students get all the technical answers they want and need, but they don’t know what it all means. It’s not an experiential answer. Business schools are now teaching students differently. Business plans competition is for professors who don’t know entrepreneurship. Business model competition matters, though, because they match what you see. It's fatal to think about entrepreneurship as a job. Startup is a calling. It's a passion. Working 24/7 for peanuts. The odds of success are infinitely low. McKinsey is a great job. You get a nice office, you get an expense account, you get to wear a suit. Normal people work for McKinsey. But you have to certifiably insane to be an entrepreneur. It's very hard. Being entrepreneur is like being an artist. You cannot get it out of your system.

Thank you for reading, and let me know what you think!

Ron Villejo, PhD

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