Bobtuse Bobservations: October 2013

Before attending an October NSF I-Corps entrepreneurial workshop in Brooklyn, I finished the required reading:

Steve Blank's The Startup Owner's Manual: The Step-By-Step Guide for Building a Great Company, and
Alexander Osterwalder's Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers.

In this post I'll share a few things I took away from the workshop as an observer, and what I learned from the books.

As a launching point, a startup was defined as:

"A temporary organisation designed to search for a repeatable and scalable business model"

I was struck by the phrase temporary organization, but I suppose the idea is that once you become a revenue generating venture, you're no longer in the startup phase, rather you toggle the switches into an operational business where success is measured by how well you execute.

National Science Foundation I-Corps

The I in I-Corps stands for Innovation.

There is a shift afoot in the NSF away from funding stand-alone scientific research toward "broadening the impact" of basic research.

One way to broaden the impact of scientific research is to fast-track the science into products and businesses. Ergo we have I-Corps. From the I-Corps website:

The NSF Innovation Corps (I-Corps) is a set of activities and programs that prepare scientists and engineers to extend their focus beyond the laboratory and broadens the impact of select, NSF-funded, basic-research projects.

I-Corps, and the Brooklyn workshop I attended, are rooted in the soil of the Lean Startup movement.

Context: Customer Discovery & Lean Startup

Steve Blank is the de facto graybeard of Lean Startup. Lean Startup was proposed in 2011 by Blank's former student and entrepreneurial mentee, Eric Ries. While Ries popularized the movement beyond the software community, Blank contributed the essential first step:

Customer Discovery

With the exception of Customer Discovery, Minimum Viable Product, and the novel idea of iteratively testing a hypothesis about perceived customer value, much of Lean Startup is derived from the Agile / XP movement which has been used for over a decade in the software community.

Historical Context: Waterfall → Agile → Lean Startup

Software developers progressed from Waterfall to Agile and, more recently, into Lean Startup.

Waterfall is a sequential design process that was the canonical approach to software development for over 40 years. The stages of a waterfall are an unfortunate but apt metaphor for process rigidity (i.e., a new stage may not start until its immediate predecessor is completed).

Out of the process rigidity of Waterfall came the Agile Manifesto (Snowbird, Utah 2001).

Software developers have lived through the gains and pains of Agile implementations for over a decade (see Bottom-Up Change: The Agile Manifesto at 10). The lighter weight Agile taught us to embrace change, to adapt quickly to an evolving product vision, and to produce working software for the customer. Agile also taught us to iterate over bite-sized chucks of work and to reflect upon what we'd accomplished. We learned the value of incremental development. In short, we learned to

Plan, produce, and reflect.

Much of the Agile mindset is well-suited for starting a business.

The Business Model Canvas

Much of the workshop was centered about teaching graduate science and engineering students how to effectively use a Business Model Canvas. A Business Model Canvas is a template for developing new business models. The primary directive of a startup is to search for a viable business model.

"Startups search. Companies execute."
― Frank Rimalovski, NYU Entrepreneurial Institute.

In the journey to find out if your model has legs, the Business Model Canvas is used to organize your hunches about what will sell and who your customers will be.

Business Model Canvas

Over the course of the 3-day workshop, the Business Model Canvas became both narrative and scorecard. It was used for measuring progress in discovering the essential aspects of the model. Participants were charged with finding and interviewing potential customers so they could test their hunches. They were admonished to

"Get out of the building!"

And participants were urged to,

"Start thinking about the ecosystem...how the money flows."

Participants were instructed to frame, trim, and hone their product concepts (and the written descriptions of their products) so that the gist of the product was easily and instantly communicated to a less sophisticated audience.

"Frame the description of your product for your mother."
― Lyndsey Marshall Gray, NYU Entrepreneurial Institute

I observed graduate students, called Entrepreneurial Leads or ELs, struggling to coherently and concisely express concepts like Value Proposition or Customer Segments to a panel of business experts and instructors who grilled them. Several times a panel member blurted out, "Who cares?"

"This is delivery. We learn by doing."
― Jerry Engel, Berkeley-Haas School of Business

A Value Proposition is a promise of value. The Business Model Canvas has a box for Value Proposition, labeled VP. Participants were encouraged to write their value propositions as testable assertions.

A value proposition applies directly to one customer segment or another. The Business Model Canvas also has a box for Customer Segment, labeled CS. The workshop instructors stressed the importance of being able to map a value proposition to a specific customer.

When participants struggled with identifying their customer segments, they were encouraged to be concise and to think about the pointy tip of the arrow.

"Who are the people who will open their wallets first?"
―Lyndsey Marshall Gray, NYU Entrepreneurial Institute

Parting Wisdom

Many scientists, and would-be entrepreneurs, are hyper-focused on technologies or alleged features rather than benefits because that's what they find most compelling, but the process of determining value, and who might buy a product, has more to do with the Pains and Gains experienced by a potential customer.

Like the Business Model Canvas, The Startup Owner's Manual and Business Model Generation are dry and formulaic. But who am I to argue with success?

By all accounts, searching for a business model is a step-by-step journey of conquering one of the aspects of business development that might be most uncomfortable to those of us who are socially-inept or analytically minded:

Engaging people to validate your hunches about your product.

Software startups must be able to distinguish between users and paying customers because they're not always one in the same.

Stripped bare, Steve Blank's insight is that customer discovery is essential. One personal epiphany worth repeating over and over again for would-be software entrepreneurs:

Don't bother coding anything until you discover & understand who's going to buy it.

If you're attempting to bootstrap a software product or company, The Startup Owner's Manual is essential reading because I'm betting the formulaic practices will save you months, if not years, of misguided effort.

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