Why Your Startup Needs Lean Startup to Succeed

This is an extract text from the great fireside chat between Prof. Erhan Erkut and Steve Blank on October 5, 2015 at Startup Istanbul Conference. It has great insights on the lean startup building blocks and tools for entrepreneurs.

Erhan Erkut:What are some of the risks that an entrepreneur faces and how would the entrepreneur mitigate them if the MBA program is not gonna do it for them?

Steve Blank:So one of the biggest both benefits and problems with being a founder of a company is that a founder is driven by passion and faith. And in fact on day one, A startup is closer to a religious organisation than anything else.You are actually driven by your belief that you see something that no one else does.And in fact that’s not only the reason you will succeed that’s also the reason that you will fail.Because very quickly for a startup to succeed you need to turn that faith into facts as rapidly as possible. The mistake is thinking that just because you believe that therefore it exists.And the whole idea about the lean startup movement says you know there are no facts inside your building, So why don’t you get outside and try to get some facts as early as possible.And that was my contribution to this portion called customer development.

And so the Lean Startup Movement actually does three things. It says let’s take all your hypothesis and by the way I use this word hypothesis because at Stanford where I teach the students pay 50 Thousand Dollars a year and their parents want to know they learning very big words. But outside of Stanford the word Hypothesis means guess.And if you really think about it most of your startups are based around a series of untested guesses. Though you might believe and you might have convinced other employees to join and you might have convinced investors to give you some money, the odds are most of what you have are a series of untested guesses.

And what we gonna do is have you write down those guesses and we gonna use something called the business model canvas by someone named  Alex Osterwalder. I would have added Alex’s book to your reading list.This book is called business model generation and in one single diagram one piece of paper we could put all your guesses,all the guesses.

Who’s the customers ? What am I building for them? What’s the distribution channel? How do I get,keep and grow them? What are the profits and losses and costs?etcetera.

Then the second thing we gonna do is get out of the building.Physically and sometimes virtually and test those hypothesis by doing the third thing agile engineering and building Minimum Viable Products.

And so the lean startup consists of those three pieces.

Business Model Design to articulate or write down your hypothesis, customer development to get out and test them and agile engineering to physically build iterative and incremental versions of the product before you do what we call first customer ship.In a lean method you are continually testing the product, almost from day one and it’s not just code it could be a powerpoint, could be a wireframe, could be just data to get some early customer feedback and what’s interesting is the lean startup maybe five years old yet MBAs had 100 years of management stack and we kind of just building our stack of tools for entrepreneurs.

Oscar Osterwalder came up with the business model canvas, I came up with customer development, Eric Ries came up with the insight that agile engineering is the best way to build MVPs.And so all of us have just been adding to this management stack and others, the books you mentioned as well. And so entrepreneurship and tools for entrepreneurs, all of you are now the beneficially in the 21st century of all this new thinking and how to think about startups.

Again I wanna emphasize if you are doing the same thing you would have done in a large company, you are going to go out of business.

BIG IDEA! Don’t believe that just because you believe so it’s going to happen.

─ December 28, 2015