Of course the knee-jerk reaction from most people is that government cannot help in such situations without screwing things up… but then you see things like this:

63 scientists and engineers in 21 teams made 2,000 customer calls in 8 weeks, turning laboratory ideas into formidable startups. 19 of the 21 teams are moving forward in commercializing their technology.

That’s a great result from what they set out to tackle.  And of course there are no guarantees that these ideas will work – odds are most of the 19 proceeding will fail. But if the NSF can get scientists thinking about commercializing the tech they produce, the economy (and the US) will benefit as a result.

And keep in mind Steve Blank’s “Secret history of Silicon Valley”:

The Scientists, the NSF and the teaching team were all going to go where no one had before.

Given that Silicon Valley had started with scientists and engineers not MBA’s, I thought this was a bet worth making.

Pretty cool.  But the crazy thing is that they’re going to keep going – doing cohorts of 25 going forward.  Have to applaud this program for trying to get the most out of government R&D dollars – and hopefully spawning some startups in the process.  Just another interesting test case for the “process” of teaching entrepreneurship (and as he put it, applying the scientific method to developing a business).

Related posts:

1. Steve Blank: Entrepreneurship is an Art not a Job
2. People, Staffing, and Steve Blank’s SuperMac Series
3. Steve Blank SXSWi: New Rules for the New Bubble

1. Come up with an idea for a product that you think people will want, but you don’t see satisfactorily provided to the market.  (ideas are often for art projects or music albums, not just consumer products like this)
2. Build a prototype and put together a pitch video to sell the idea
3. Do the research to figure out how big a production run you need to do to make the object “affordable” (whatever that means for what you are pitching).
4. Put your kickstarter project page together, including a fundraising goal that supports your minimum requirements.
5. Wait to see how many people and $ show up to support your project.
6. When (if) project funds, get started building the product (or producing the benefits the contributors are entitled to).
7. Ship it.  If it sells well, consider selling more of the product online, knowing that you now have won over an early adopter fan base.

It favors small production runs, prepaid by motivated customers.  The magic is that you don’t put capital at risk until buyers have paid (up front!) for the product.  It is a great way to get pre-commits from a motivated community. And to my way of thinking, this is just a new (and better) process for finding demand when you don’t have the capital to “build it and hope they come.”

If we relate this to the Lean Startup, or specifically to Steve Blank’s incarnation the Lean Launchpad – one of the key tenets is to “get out there and talk to customers”.  Moreover, to find paying customers.  Not just customers who say they will buy it, but customers who will literally write checks to you.

And when they do this – in great dollar amounts or numbers of customers – then you move into production. Kickstarter gives the product team a chance to do this with physical goods in a way that was nearly impossible 10 years ago.  It also allows an innovative team to address niche demand in a way that they previously couldn’t.  In the same way that eBay allowed people to find markets for niche products, so does kickstarter – in one case auctioning used goods, in the other case contributions toward products that don’t yet exist!

This moves physical products into the realm of a process that looks like:

1. Design
2. Sell
3. Build

Which is much more capital efficient than

1. Design
2. Build
3. Sell

As it allows for less waste (building products that no one wants- akin to getting the requirements wrong in software and BPM projects).  And it allows for some feedback loop between design and selling, before moving into the build phase.

It feels like something that could be truly transformative for small business product development.  I have several friends in the business of producing physical objects for sale (furniture, productivity tools, gadgets), and I’m telling all of them they have to try this process and see if it works for their business, and reduces the risk for them.

As a buyer, the other thing that is really fascinating is the exposure to the process, or craft, behind the production of these objects.  The videos and written updates about the procedures are quite educational.  As a process guy, I see it all through the lens of repeatable process with, typically, an irreplaceable human component.  Gratifying craftsmanship.

Related posts:

1. #IBMImpact: Introducing Complementary IBM products to Lombardi customers
2. Improving the Process for Teaching Entrepreneurship
3. A Process is only as Simple as it is

The concept of yearly “improvements”, whether styling or incremental technology improvements, every model year gave GM an unbeatable edge in the market. (Henry Ford hated the idea. He had built Ford on economies of scale – the Ford Model T lasted for 19 years.) Smaller car makers could not afford the constant engineering and styling changes they had to make to keep competitive. GM would shut down all their manufacturing plants for a few months and literally rip out the tooling, jigs and dies in every plant and replace them with the equipment needed to make the next year’s model.

The title of the series is “How the iPhone Got Tail Fins”, using GM and Ford as foils for the smart phone businesses competitors.  A fascinating way of understanding the market, and how business processes can affect strategy, or vice versa.

Related posts:

1. Interesting Interview with Scott Monty
2. iPhone in the Enterprise
3. Data to Support Apple’s iPhone Strategy

Today, the National Science Foundation (NSF) – the $6.8-billion U.S. government agency that supports research in all the non-medical fields of science and engineering – is changing the startup landscape for scientists and engineers. The NSF has announced the Innovation Corps – a program to take the most promising research projects in American university laboratories and turn them into startups. It will train them with a process that embraces experimentation, learning, and discovery.

The NSF will fund 100 science and engineering research projects every year. Each team accepted into the program will receive $50,000.

I feel sure that some will nay-say.  But Steve Blank has documented on his blog how the government has fostered a startup ecosystem before in his Secret History of Silicon Valley series, and this has some of the same feel to it – but with the added impetus of a better way to wrap scientists and researchers brains around the concepts of startup formation.

As a process guy, I’m really impressed with how much the process of “starting up” has been improved upon in just the last decade – and Steve Blank and Eric Ries and others in the Lean Startup movement are behind much of it (too many contributors to name in one post – because it really is a collection of ideas from many people and companies). I’ll continue to follow along as it informs our own growth as a “startup” consulting firm, but also because there are interesting cross-pollination opportunities with the process improvement work we do.

Congrats to Steve Blank, the NSF, and everyone else who was part of making this I-Corps program come true.

Related posts:

1. Ash Maurya Reconciles Customer Development with Web Apps Business Realities
2. A Process for Teaching Entrepreneurship?
3. Steve Blank and the NSF’s Innovation Corps

I recommend reading the whole series of posts, but if you are the kind of person that reads the last chapter first, or likes to eat dessert before the entree, then have at it.

So what is this Lean Launchpad class in his words?

Business plans are fine for large companies where there is an existing market, existing product and existing customers, but in a startup all of these elements are unknown and the process of discovering them is filled with rapidly changing assumptions. Experienced entrepreneurs realize that no business plan survives first contact with customers. So our goal was to teach something actually useful in the lives of founders.

Building a product is a critical part of a startup, but just implementing build, measure, learn without a framework to understand customers, channel, pricing, etc. is just another engineering process, not building a business. In the real world a startup is about the search for a business model or more accurately, startups are a temporary organization designed to search for a scalable and repeatable business model. Therefore we developed a class to teach students how to think about all the parts of building a business, not just the product.

Clearly the use of the business model canvas to capture assumptions and iterate over them is a big step forward compared to previous approaches (not that that was the only innovation).  We’ve used the business model canvas at BP3 to explain our business model, and we’ll likely use some of these techniques to tweak our business model in the future.

One of the key learnings:

3.  The process worked for all types of startups – not just web software but from a diverse set of industries – wind turbines, autonomous vehicles and medical devices.

I thought that was pretty telling.  A good process for a startup should work for more than just web software startups.

If you think you’re doing something that is just too damn creative for a process, read Steve Blank’s blog on startups.  The process may not be tightly bound or automated, and doesn’t need to be.  But there *is* a method to the madness and it can be repeated However, the outcome isn’t guaranteed to be successful – it is a startup after all.  Part of me wonders if the BPM community would be willing to accept that idea of following the process but still having an indeterminate outcome… interesting discussion to have!

Related posts:

1. A Process for Teaching Entrepreneurship?
2. Furthering the “Startup Process”
3. Austin Entrepreneurship gets another Voice

Heading into the IBM Impact conference, this feels like the right time to talk about the Lean Startup as it relates to BPM – it provides a decent segue to the topic we will speak on at Impact – “Keeping the Business in BPM“.

Let’s Review What the Lean Startup is All About

It turns out, I’ve written about this before.  But I think it is time to return to the subject with a little more perspective.  The premise behind the lean startup is embodied really well by three charts (click on this link, slides 20-22).  I’ve given each idea my own poor rendition here in the blog since I don’t see a good way to embed a single page from a SlideShare presentation.

Known Problem, Known Solution: Waterfall method

First, Waterfall development techniques were designed around situations when we know the problem really well, and we also know the solution well, and simply have to make sure we deliver a quality result.  It should be no surprise to anyone in the BPM space that this does not describe the typical BPM / Process Improvement project.

Known Problem, Unknown Solution: Agile Method

The second slide shows an innovation over the first: that when the problem is known, but solution unknown – a different technique is required to solve the problem:  Agile development. There have been many proponents of an agile approach to software development, and it is arguably the most accepted methodology among software engineers.  This does not mean, however, that it is always practiced, or practiced well, nor has it infiltrated all IT projects.

Lean Startup: Unknown Problem, Unknown Solution

The third slide shows yet another innovation: when the problem is also unknown, the solution is unknown.  At this point, we can’t rely on just documenting the requirements or interviewing the known user base.  We have to apply what Steve Blank coined as “Customer Development” – getting out of the building and talking about our problem hypotheses with customers.  When we get our hypothetical problems and hypothetical solutions in front of customers and discover we’ve “missed” the market, we “Pivot” – that is, take the lessons learned, and adapt what we’re doing to find an addressable market we can actually build a business around.  Essentially, the lean startup keeps iterating and pivoting until it finds a business that it can scale (or until it runs out of money).  Once it finds something to scale, the problem is no longer one of “searching” for a business model and solutions, but one of scaling an operation.

The coupling of the Customer Development process with the Agile Development process has been coined the “Lean Startup” by Eric Ries and others.  Why do we call the problem “unknown”? Perhaps you think of course we know what problem we’re attacking – the startup company was formed to solve this particular problem.  That sounds good – but actually startups only THINK they know what their business model will be.  Google thought their model was search.  But it was really targeted advertising delivery, based on Search and alongside search.  Small startups pivot often, but we’ve also seen large companies pivot – as IBM did when it moved to really emphasize its services business.

How is BPM Like the Lean Startup?  “Problem: Unknown”

Some readers should already be seeing a connection between the Lean Startup and BPM.  But it helps to really spell it out.  First, I propose that when you start a BPM project, you only have a hypothesis about your problem and solution.  This is what we mean when we say the problem is “unknown” – that we have a hypothesis but it isn’t proven yet.

How do we know that BPM suffers from this “unknown” Problem situation?

Because the biggest risk to budget, or even success, of BPM projects, is getting the requirements wrong.  As I often tell our team: “No, you’re not going to get good requirements up front for this project. And if you do, they’re probably wrong.” We have to approach projects with an open mind toward how requirements will evolve.

Already, most BPM practitioners approach the solution as an “unknown” or “hypothesized” solution.  This is why, for example, successful BPM projects typically have an Agile, or at the least iterative, approach to BPM development – it allows opportunities for course correction with the Business, getting closer to the “right” solution over the course of several iterations.

BPM Takeaways from the Lean Startup

But, the other side of the coin is that we BPM practitioners need to adopt some of the methods of the Lean Startup and Customer Development:

1. We need to “get outside the building”. For the IT folks developing BPM solutions, this means going outside the IT labs and seeing how the “Business” really operates.  Talk to them.  Observe them.  Read between the lines.  Get their feedback on prototypes and early releases.
2. We need to employ more A/B testing in our solutions. Don’t assume we’ve designed the right improvement to the process – prove it!  A/B testing is de riguer in software circles, but not inside IT shops, and not in process improvement methodology.  But it should be.  I’ve only seen one BPM endeavor really embrace A/B testing – and it was a great success.
3. The unit of progress is learning. This is a core principle of the Lean Startup.  While we’re searching for the right problem to solve, and the right approach to address it, learning is what we want. An A/B test that shows we didn’t move the needle as we wanted to is a success if we have learned a better path forward or avoided a costly dead-end.
4. Shift to Value-Based Delivery over Plan-Based.This means that we have to re-prioritize work throughout the project – to always keep the Delivery team focused on the highest value work.  The plan is your hypothetical plan.  Don’t stick to it when the facts dictate otherwise.
5. Get the Business and the Technical Team working together. Seriously.  Put them in the same space. Or the same room.  Make them part of the same team.  Make it the dream team.  Because when you get the leadership and team right, everything else gets easier.

There is more to it than just this… But if we can just pick up these four things for our BPM projects, we’ll make dramatic progress on improving the process of BPM. It takes leadership to drive these behaviors – but I hope that leadership just needs a little bit of encouragement through education and familiarity with the concepts behind the Lean Startup.

I’ll see many of you at Impact – in our session, I’ll touch on the whys and hows for a business-driven technical team.  And if you read this blog, you’ll have some of the underpinnings behind my part of the talk.  Of course, Lance and Reid have a few interesting points to make too!  Wednesday, April 13, 3:15PM to 4:30PM, In the Venetian – Murano 3205 room: “Wells Fargo – Keeping the ‘Business’ in BPM”

Related posts:

1. Lean Startup SXSW: Introduction
2. SXSW 2011 day 2. The Lean Startup Phenomenon
3. SXSW: Startup Village + Lean Startup SXSW = Value

Steve speaks as well (or better) than he writes.  His talk was engaging and energizing.  He started his talk (and a blog post I’ll quote here, based on the same topic) discussing a quick history of the four waves of startup investing:

• The Golden Age (1970 – 1995): Build a growing business with a consistently profitable track record (after at least 5 quarters,) and go public when it’s time.
• Dot.com Bubble (1995-2000): “Anything goes” as public markets clamor for ideas, vague promises of future growth, and IPOs happen absent regard for history or profitability.
• Lean Startups/Back to Basics (2000-2010): No IPO’s, limited VC cash, lack of confidence and funding fuels “lean startup” era with limited M&A and even less IPO activity.
• The New Bubble: (2011 – 2014): Here we go again….

Not everyone agrees that there is a bubble.  Of course, in order to disarm the “is it a bubble or is it not” discussion, he simply says “if you believe it IS a bubble, then the question is, are the rules different in a bubble than they are otherwise?  Are the rules different now, than they were for the previous ten years?”

It is hard to argue that the rules aren’t different.  Or at least that some tactics that would have been counter-productive or futile before, are now quite effective and productive.

The basic argument is that from 2001 to 2010, the Lean Startup was the way to go – conserving capital, focusing on learning and iterating, and finding a business model that could scale.  As he put it:

Startups began to recognize that they weren’t merely a smaller version of a large company. Rather they understood that a startup is a temporary organization designed to search for a repeatable and scalable business model. This meant that startups needed their own tools, techniques and methodologies distinct from those used in large companies. The concepts of Minimum Viable Product and the Pivot entered the lexicon along with Customer Discovery and Validation.

So far so good.  But what has changed in 2011, and going forward toward 2014?

1. Breathtaking scale.  The addressable market for startups is vastly bigger than it once was.  And so is the ability for startups to serve that scale (via Amazon web services, for example). Mark Suster commented on this in his SXSW recap.
2. New Exits.  There are simply better options for startups to exit now, than there have been over the last 10 years.  IPOs are back on the table.  Acquisitions are at higher valuations.  And the companies that are IPO’ing will have real profits and revenue, and massive customer #’s.
3. Better tools are available – AWS, S3, Google App Engine, Rackspace, etc.  These scaling tools weren’t there 10 years ago.  Moreover, developer productivity is up with new tools like Ruby, Rails, etc.

It seems that the key change Steve is advocating for startups is visibility.  That previously, press exposure might have hurt you by locking you into the wrong path, but going forward, press would help you by expanding your user base, and increasing your visibility for potential acquirers.

But of course, all this advice only applies if you believe there is a new Internet bubble.

There were some great quotes in the talk.  My favorite:  “There are no 10 year startups. There are only 2 year startups attached to 8 year failures.”

Steve pulls no punches, but he does deliver his critiques with a smile and sense of humor.

Slideshow, embedded below, also tells the story quite well:

 
There’s also a great Q&A with Steve Blank on GigaOm – in which he discusses how the total available market has exploded in size, and how he believes a great CEO with a great product could have come out of SXSW-interactive highly visible and talked about. In other words, he still sees SXSW as a place where you could launch.

Related posts:

1. Steve Blank: Entrepreneurship is an Art not a Job
2. Steve Blank and the NSF’s Innovation Corps
3. The Nerdpocolypse Cometh (SXSWi)

Steve, on the one hand, this post is depressing. You seem to be saying that entrepreneurs are born rather than made. That in some sense, this endeavor to teach more people about entrepreneurship is hopeless.

On the other hand, you pointed out not everyone can use these tools equally well. Well good! If they could, what point in striving against all the other people starting businesses if we’re all automatons executing the master plan.

The point is that you can, with the right tools, raise the game of everyone who uses them. With the right education and experience, you can elevate their internal game and process. You can give everyone a tennis racquet, and they won’t all be equally good, even with the same equipment. But you can teach EVERYONE to be better at tennis. I can’t believe you wouldn’t think the same is true for entrepreneurship, management, running a business.
I’m also disheartened to see people referring to science as if it isn’t creative. It is. If it wasn’t, we’d just let the computers do the science and R&D wouldn’t we? The scientific method and the “Pivot” don’t sound terribly different to me.

The Word processor doesn’t make someone an artist- but it has made people who write more productive – allowing, no doubt, more people to get into writing as a side-career rather than starving while they pursue their craft.

Regarding that practice: recall that it has to be practice with a purpose (the learning that goes with the practice, the purposeful working on weaknesses and leveraging strengths). Giving entrepreneurs a better framework and tools gives them a better shot at practice with purpose.

And having said all of that, I find it encouraging that human variance will still mean that some will succeed beyond others. Because individualism still matters too. That sounds like capitalism to me.

Given how many successful businesses there are in the world, perhaps we think this entrepreneur thing is a little bit more rare than it really is.

I think we too easily discount the creativity that everyone doing work exhibits.  We also too easily give up on the idea that other people can improve.  Almost everyone I’ve ever talked to thinks they can improve themselves.  I feel sorry for the folks I talk to who *don’t* seem to have that belief. What Steve Blank is teaching in his classes and through his blog is an improvement over trial-and-error. But, the best entrepreneurs will take great advantage from his concepts and teaching, and the worst entrepreneurs simply won’t.  It will be that way with any improvement tools or teachings. Is it any different in BPM?

Related posts:

1. Steve Blank SXSWi: New Rules for the New Bubble
2. Steve Blank and the NSF’s Innovation Corps
3. People, Staffing, and Steve Blank’s SuperMac Series

I took copious notes throughout the day.  This day’s sessions were the highlight for me.  The concepts in lean startups and minimum viable product are so relevant for BPM, and not as well understood by our BPM community as you might think. After all, the Lean Startup is focused on areas where the problem is unknown or uncertain, and the solution is also unknown.  In BPM, we face a similar problem – it might be more accurate to say that the problems are “estimated” and the solution is “estimated” – but the point is, we don’t know for sure that we’re solving the right problem before we start the BPM journey, and we don’t know for sure that each solution we iterate is the right solution.  It takes iterations of customer discovery and agile development to get us to a better hypothesis about the problem and solution.  If this sounds like crazy talk, bear with me and read blog posts I’ll put up over the next few days that dig into this further.

Overall the sessions violated one aspect of the spirit of SXSW – there were very few breaks (I counted 2, and one was 30 minutes for lunch), no time for hallway conversation, and no breaks to get out of your middle row seat so that you could have such a hallway conversation.  All of these fantastic entrepreneurs in one space, one room, and we could hardly talk, except via the backchannel of twitter and the like. I think it only worked at SXSW because the sessions were at the AT&T Conference Center, far removed from the center of gravity for SXSW, the Austin Convention Center.

The content was first rate, and there’s too much for one blog post to cover!  But they could have split some of the sessions into two rooms to really make the feel more like SXSW.  It would have forced choices – you can’t go to everything- but the choices would have been good choices, and twitter and blogs allow us to follow content in another session if we’re motivated to. And it would have allowed the schedule to BREATHE a little bit.  Trust me, it needed it.  Finally, it would have allowed for the people who couldn’t get into the sessions in the afternoon to actually participate or watch at least a relevant session, if not the one they were hoping for.  I felt that there was a lot of value pent up in the entrepreneurs in the room, that wasn’t unlocked because there just wasn’t any time at all for the sidebar conversations.

Eric “Pivot” Ries was the emcee, but we had significant appearances and contribution from Dave “Nice to #$@!ing meet you!” McClure , Steve “Epiphany” Blank, and many other entrepreneurs.  My favorite talk, and the one that I was most looking forward to, was Steve Blank’s discussion of new rules for the new bubble.  For this session, even more than the others, it was standing room only, with people sitting on the floors and standing in the hall to listen in.

I had the good fortune of meeting up with fellow Austin entrepreneurs while I was there-  Jeff Chambers, and Ed Roman.  I also spent most of the day sitting with Elliot Loh (@elliotloh) visiting from SF.

Later I got to introduce a couple of my friends from out of town to Garridos, a great modern Mexican restaurant downtown.  We also checked out the Frog Design SXSW Opening party, which, as usual, involved some crazy technical and interactive features, as well as massive lines to get in.

Day 2 was an incredibly long day, with so many notes I knew I couldn’t hope to get my blog up-to-date by the time I finished the day.

The main takeaways:

1. The Lean Startup movement is grounded in real empirical data, real case studies, and real results.  It is no longer an “interesting idea” and seems to be on its way to being accepted as the “best way” to approach starting up your company.
2. Entrpreneurs, investors, and academics from the Bay Area believe there is a sort of “bubble” in investing.  On the other hand, they also believe that the companies likely to go public now are companies that have real scale and make real money.
3. There’s an incredible interest among entrepreneurs to improve their game – especially the ones that are building their companies with minimal or no outside investment.
4. SXSW-interactive has the power to draw an amazing group of people to one spot, to even one room, in Austin, TX.

If they had added an after-party on-site, or a good strong networking break, this would have been the key place to be on Saturday.  As it was, it was the key place to be but no one else would know you were there, and you’d have to track down your like-minded entrepreneurs later in the conference (good luck finding them!).

Related posts:

1. SXSW: Startup Village + Lean Startup SXSW = Value
2. Lean Startup SXSW: Introduction
3. SXSWi 2011. Day 1. BPM @ SXSW

It’s an interesting adaptation of the customer development process outlined by Steve Blank in “Four Steps to the Epiphany” (I’m partly partial to Steve Blank because several of my friends went to work for epiphany).

But I also find it interesting to follow the development of processes for startups, for customer development, for the lean startup.  Following Steve Blank, Eric Ries, Ash Maurya, and Jason Cohen gets you pretty far along the path to understanding this school of thought.

Related posts:

1. OpenAustin.org: a Customer Development Project in the Works?
2. A Process for Teaching Entrepreneurship?
3. Sometimes Leadership Means Executing the Plan