News & Analysis
Has Steve Blank found a way for startups to fail less?
George Leopold
7/16/2012 8:46 PM EDT
Blank, author of “The Startup Owners’ Manual,” is also a lecturer at Stanford University’s Department of Management Science and Engineering as well as the University of California at Berkeley’s Haas School of Business. Since last year when it was founded, Blank also serves as lead instructor for the NSF’s Innovation Corps program.
The serial entrepreneur launched no less than eight technology startups before “retiring” in 1999. Among them were Zilog, MIPS Computers, Rocket Science Games, Ardent and E.piphany. The score card, according to Bland, reads like this: “Two large craters (Rocket Science and Ardent), one dot.com bubble home run (E.piphany) and several base hits.”
Based on that track record, Blank said over coffee recently that “we kind of made a mistake for the last 40 years. We’ve been treating startups like smaller versions of large companies. What we know now is that simply is not true.”
Startups basically spend their first year searching for a business model, the former Air Force electronic warfare specialist continued. “There’s now a methodology for how to make startups fail less.”
Despite growing momentum for the I-Corps program, Blank found himself on the hot seat this week (July 16) during a House Science Committee hearing on the NSF program. In a war of dueling press releases, GOP critics like Rep. Mo Brooks (R-Ala.), chairman of the House Science R&D subcommittee, insisted the program is “unsustainable” in an era of budget deficits and that I-Corps ultimately puts the government in the position of picking “commercial winners and losers.”
The NSF is expected to spend about $5 million on I-Corps teams in fiscal 2012 and is requesting $19 million in fiscal 2013 to ramp up the program.
Each I-Corps team receives a $50,000 grant, then Blank puts candidate startups through their paces by getting entrepreneurs “out of the building” to meet with as many as 100 potential customers over the course of eight weeks to gain a deeper understanding of the market for their technology.
During this week’s hearing, Blank fired back at the program’s critics: “The I-Corps program does not pick winners and losers. It doesn’t replace private capital with government funds. Its goal is to get research the country has already paid for to the point where a team can attract private capital in the shortest period of time.”
With NSF managers preparing to expand the I-Corps program to 175 teams this year, both sides in the innovation debate may have an answer soon about whether Blank’s lean startup approach fundamentally changes the way tech entrepreneurs operate and succeed.
Related stories:
NSF's Innovation Corps targets 'innovation ecosystem'
Manufacturing by design: New skills needed to compete
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george.leopold
7/16/2012 9:30 PM EDT
Mr. Blank has been "around the block" in Silicon Valley for many years. Eight startups later, he is trying to teach the next generation of entrepreneurs by getting them out of the conference room and into face-to-face meetings with potential customers. This, Blank argues, is the best way to determine whether you have a technology that will solve someone's problem.
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Neo1
7/16/2012 10:27 PM EDT
Startups start with a premise of solving a problem which needs to be solved given a certain price. It's very critical that they interface with prospective customers early in their development phase to avoid the heartburn later when there is misalignment. Understand the customer is the first mantra of any successful business.
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Cuno
7/17/2012 5:28 AM EDT
Hm, this article implies that Mr. Blank has created the lean startup method. I would expect a reference to Eric Ries, e.g. http://www.amazon.com/The-Lean-Startup-Eric-Ries/dp/0670921602.
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george.leopold
7/17/2012 8:55 AM EDT
Eric Ries's book is available on Steve Blank's Web site. If nothing else, Blank has put the theory of the lean startup into practice.
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dylan.mcgrath
7/17/2012 9:35 AM EDT
Blanks' philosophy makes a lot of sense to me. Too many startups never seem to get off the ground and hit their stride. It's pretty interesting to take a look at the I-Corps. awardees. Not a lot of info about them, but some very interesting sounding projects.
http://www.nsf.gov/news/news_summ.jsp?cntn_id=121879&org=NSF&from=news
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Kenlbear
7/17/2012 3:24 PM EDT
Marketing - the last refuge of former technical contributors. Go be a marketer and give up your aspirations to invention. Redefine innovation as business planning. Cover up real creativity to meet the demands of investment bankers.
If this is "real life", imagine a landscape devoid of Apple, Google, Facebook, etc.
Someone once said that the "world can only tolerate a few real innovators". The rest must be suppressed. Sure looks that way!
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george.leopold
7/17/2012 5:28 PM EDT
There is certainly an element of "marketing" in this approach, but the key is to get startups to stop worrying about a business plan, which is little more than a marketing document, and "get out of the building" and talk to real customers with a problem in search of a solution. Maybe Blank and NSF's approach will work, perhaps not. We are going to continue tracking this initiative to find out which teams succeeded, which failed and why.
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MindTech
7/20/2012 5:14 PM EDT
I've read a bunch of Steve Blank's blog posts and articles. Great stuff, really (and his history with the air force is quite interesting too).
His biggest point is that most start-ups fail because they don't know what they are doing. In the past, start-ups were based on an idea that was then made into a business plan. The plan was sold to venture capitalists based on merit, intuition, and charisma. Then the plan was executed (sometimes at gunpoint, held by the venture capitalists) until it either succeeded (a small number) or failed (most of them).
Venture capitalists are a lot more wary now, and the tools to create and produce ideas are becoming more accessible (the internet, turn-key solutions, etc). And the biggest point of failure for most start-ups in the first year or so is that the idea turns out to be mostly (or entirely) wrong or mis-founded. The expected market just isn't there. No one knew this, of course, because no one asked before making the business plan.
Mr. Blank's suggestion is to re-order the first few years to build the business and then grow it based on asking first and then responding quickly to the answers you get.
Step 1 - Idea, and initial (small) plan
Step 2 - Ask your potential customers about your idea and gather as much feedback as possible
Step 3 - Change the plan to lineup with the information you just gathered.
Step 4 - Repeat steps 2 and 3 constantly as you build your product.
Step 5 - When you have a viable and sustainable business, then sit down and make the business plan that will grow you from small to medium to large business.
Step 5 (alternate) - If there is no sustainable business, kill the idea and start again with something new. Know when to fold 'em.
And yeah, it is marketing. It's one thing to innovate or invent something. It's another thing to try and get anyone to buy it, use it, or care about it. Without marketers we'd just be making things for ourselves.
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