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Why Everything You Know About Entrepreneurship May Be Wrong
1. Why Everything You Know About
Entrepreneurship May Be Wrong
Nathan Furr
nathanfurr@gmail.com
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. 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?
5. Entrepreneurship Practice and Theory:
Where Does It Come From?
Economics
Theory
Entrepreneurship
Practice Theory &
Practice
Practice
Sociology =
/ Psych
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. Results of Current Effort
New Business Success <90% Failure
Business Planning No Effect
Entrepreneurship Training No Effect*
*No Effect in GATE Study
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…
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
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.)
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. 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. 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 and
Entrepreneur location, Sell the
from friends, add features
has a idea develop the product
family and for broad
product
fools appeal
20. The Roots of the Canonical Model
The Product Development Model
Test
Identify Create Sell product
Build alpha product,
product product to
product build beta
opportunity specs customers
product
21. Broken Model
PD Model Based on Execution Not Search
“Blind Leading
“” Problem the Blind”
Problem
2 Year /
Discuss with
Find an office, $2M
Entrepreneur 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. 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 Russian
Entrepreneur 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. #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. How to Fix a Broken Model
Discuss with Perfect the
Find a
/ raise money product and
Entrepreneur location, Sales
from friends, add features
has a idea develop the Customers
family and for broad
product
fools appeal
26. Fundamental #1: Get Into the Field
“Get the heck outside the building!” –Steve Blank
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. Fundamental #3: Intellectually Honest
Learning
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. Fundamental #4: Inexpensive, Rapid
Experiments
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
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. 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. 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. 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. 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. Summary of Five Stages
Product 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. What’s Different from
Lean Startup / Customer Development
Entry-level / How-to
Monetizable Pain Hypothesis
Virtual Prototype
Minimum Feature Set vs. MVP
How Put Into Practice / Scale
