Why Everything You Know About Entrepreneurship May Be Wrong


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Why Everything You Know About Entrepreneurship May Be Wrong

  1. 1. Why Everything You Know AboutEntrepreneurship May Be Wrong Nathan Furr nathanfurr@gmail.com
  2. 2. Introduction Nathan Furr PhD, Stanford Technology Ventures Program Entrepreneurship Professor, BYU Activities Related to Today Nail It then Scale It International Business Model Competition Forbes Expert Contributor
  3. 3. A Test ??? When was the first large corporation formed? When was the first business school formed? When was the first MBA granted? Why should I care?
  4. 4. Motivating Story
  5. 5. Entrepreneurship Practice and Theory:Where Does It Come From? Economics Theory EntrepreneurshipPractice Theory & Practice Practice Sociology = / Psych
  6. 6. What That Means for Entrepreneurship Entrepreneurship 101 = Business Planning Entrepreneurship Process = Product Development Model Entrepreneurship Focus = Gather Resources (Raise $) Entrepreneurship Team = Divisionalized Roles
  7. 7. Results of Current Effort New Business Success <90% Failure Business Planning No Effect Entrepreneurship Training No Effect* *No Effect in GATE Study
  8. 8. … It’s All the Entrepreneur ??? Entrepreneurs are born … It’s all about passion … The jockey, not the horse It’s all about the team They walk through brick walls…
  9. 9. The Wrong Process & Theory
  10. 10. Known Versus Unknown ProblemsKnown Problem Mgmt Unknown Problem Mgmt Planning Radical Experimentation Execution Assumption Tests Optimization Rapid Cycles Coordination Minimization Error Avoidance Satisficing Change
  11. 11. The Marshmallow Challenge Illustration Best? Worst?
  12. 12. Known versus Unknown Problems Solution Known Unknown Entrepreneurial Entrepreneurial & Management Traditional Management Examples (at launch): Unknown Examples: Technology transfer, PayPal, Microsoft, new market entry with existing Facebook, Omniture, products Segway Problem Entrepreneurial & Traditional Traditional Management Management Known Example: Cars, phones, Examples (at launch): breakfast cereal, PCs, etc. Google, Quora, Product line extensions
  13. 13. The Entrepreneurship Paradigm Shift
  14. 14. Evidence of the Shift Customer Development Steve Blank Lean Startup Eric Ries Nail It then Scale It Nathan Furr and Paul Ahlstrom Emerging ideas in action Y Combinator, TechStars, Dream It Ventures, BoomStartup Other related ideas Business Model Generation (Alex Osterwalder); Getting to Plan B (John Mullins); BoomStart (Rhoads et al.)
  15. 15. Nail It then Scale It
  16. 16. One Approach www.cafepress.com/nailitthenscaleit
  17. 17. The Innovation Challenge Most startups will fail 60-70% of new businesses fail within 4 years 60-70% venture funded startups will fail In some sectors up to 90% of startups fail Are we doing something wrong?
  18. 18. Is There a Process? “Most successful entrepreneurs I’ve met have no idea about the reasons for their success. My success was a mystery to me then, and only a little less so now.” - Bob Metcalfe, Inventor of Ethernet
  19. 19. What Is the Canonical Process How to build a business 1.0 Reinforced in most universities by the business plan class Discuss with / Perfect the Find a raise money product andEntrepreneur location, Sell the from friends, add features has a idea develop the product family and for broad product fools appeal
  20. 20. The Roots of the Canonical Model The Product Development Model Test Identify Create Sell product Build alpha product, product product to product build betaopportunity specs customers product
  21. 21. Broken Model PD Model Based on Execution Not Search “Blind Leading “” Problem the Blind” Problem 2 Year / Discuss with Find an office, $2MEntrepreneur trusted Raise money Start selling build a has a vision friends and from triple F the product Russian Product family Roulette “Build It and They “American Idol” Will Come” Problem Myth
  22. 22. The Broken Model Product Development Model Based on Execution Not Search “Midnight “Feature Lock-in” “Sales Pipeline Genius” Stage Stage Problem” Stage Discuss with Perfect the Find a / raise money product and RussianEntrepreneur location, Sell the from friends, add features has a idea develop the product Roulette family and for broad product fools appeal “Escalation of “American Idol” Commitment” Stage Stage
  23. 23. #1 Cause of Startup Death? Premature Scaling Building products before you nail the pain Writing marketing materials before you nail the solution Hires sales teams before you know how to sell Spending money before you understand the business model
  24. 24. How to Fix a Broken Model Discuss with Perfect the Find a / raise money product andEntrepreneur location, Sales from friends, add features has a idea develop the Customers family and for broad product fools appeal
  25. 25. Nail It then Scale ItThe Fundamentals
  26. 26. Fundamental #1: Get Into the Field“Get the heck outside the building!” –Steve Blank
  27. 27. Fundamental #2: Fail Fast The goal is to fail fast and inexpensively Redefine failure The only failure is wasting your time and money when you could avoid it 1000 Markets Example
  28. 28. Fundamental #3: Intellectually HonestLearning Common Learning Traps Confirmation bias Motivation bias Familiarity bias Superstitious learning Goal: Listen to understand the world as it really is Attitude of wisdom Willingness to be wrong and to fail Example: Mike Cassidy, Xfire
  29. 29. Fundamental #4: Inexpensive, RapidExperiments Experiment with virtual prototypes Identify your assumptions and turn them into facts Power in low cost, simple, rapid Example: Jam experiment Example: Classtop and the $300 software package
  30. 30. Nail It then Scale It: The Five Phases
  31. 31. Phase 1: Nail the Market Pain Objective: Discover the Monetizable Market Pain Discover the “job” your customer is trying to get down without being biased by the solution Develop the Big Idea Prototype Steps: Step 1: Don’t build anything Step 2: Write down Monetizable Pain hypothesis Step 3: Write down Big Idea Prototype Step 5: Quick test with customers Step 5: Quick exploration of markets Test: Customers return your cold call Examples: Convergent Technologies vs. Ardent, Fast Office, RecycleBank, Lunarr, Classtop
  32. 32. Phase 2: Nail the Market Solution Objective: Discover the Minimum Feature Set that drives purchase Steps: Test 1:Virtual Prototype Test Test 2: Prototype Test Test 3: Solution test Test: Customers purchase Examples: Intuit (Quickbooks: Simple Start), Motive Communications, Classtop, CrimeReports, IMVU, Craigslist, Ford, Google …
  33. 33. Phase 3: Nail the Go-to-Market Strategy Objective: Discover customer buying process and unique sales process for your customers Steps: Test 1: Buying process discovery Test 2: Market infrastructure discovery Test 3: Pilot customer validation Examples: Intuit (Quicken) Supermac Motive Communications Knowlix, Aeroprise, Design within Reach, …
  34. 34. Phase 4: Nail the Business Model Objective: Validate financial model & ignite business model Steps Leverage customer conversations to predict business model Validate the financial model Iteratively launch product and go-to-market strategy Business dashboard with continuous information flow Adjust speed depending on market type Examples: Webvan Webmetrics, Knowlix,Yahoo
  35. 35. Phase 5: Scale It Objective: Scale discovered model until it breaks Phase change recognition & management Recognize changes Shift process, structure and employees Emphasize with visual management Consciously define culture Succession and transition Leaping between markets Examples: Intuit, Fusionsoft, Craigslist, SodaStart, IMVU
  36. 36. Summary of Five StagesProduct development Before you build anything: Identify hypotheses about customers Test those hypotheses as cheaply as possible Identify exactly customer pain and your solution with customer Use a virtual prototype Sales development Discover exactly how customers buy Develop a replicable sales model
  37. 37. What’s Different fromLean Startup / Customer Development Entry-level / How-to Monetizable Pain Hypothesis Virtual Prototype Minimum Feature Set vs. MVP How Put Into Practice / Scale
  38. 38. Thank YouNathan Furrnfurr@byu.eduwww.blogs.forbes.com/nathanfurrwww.businessmodelcompetition.comwww.cafepress.com/nailitthenscaleit