Lauded as ‘the father of modern entrepreneurship,’ Steve Blank — serial company founder, professor of innovation and author — co-created the Lean Startup methodology wth his former UC Berkeley student (now bestselling author) Eric Ries and business model design champion Alex Osterwalder. Below he shares his thoughts on why the approach has become the playbook for tens of thousands of young tech companies.
“The Lean Startup movement came from my work, begun over a decade ago, Eric Ries’s work and Alexander Osterwalder’s work. The sum of it was best defined in a May 2013 Harvard Business Review article, which made this important distinction: large companies execute known business models; startups search for them.
What’s really important about that? For the past 100 years, business schools and management consulting firms have given large companies tools for execution: how to get better at strategy, at HR, at supply chain and so on. But if you really think about it, those were largely about how to execute a known business model more efficiently.
For startups searching for a business model of their own, there were no tools. The first piece that kicked off Lean Startup was my book, The Four Steps to the Epiphany [published in 2003 and now in its fifth edition]. It basically said something which we kind of laugh about today but that’s actually still a problem for startups and large corporations alike.
That is, there are no facts inside your building, so get the heck outside and talk to customers. You could be doing all these planning meetings and product management meetings or whatever, before someone asks, ‘Hey, did anybody talk to the customer? Or did anybody talk to potential customers? Did anybody talk to our channel?’ And the typical response: ‘Oh no, but here are the features I think we need to have [in the product].’ In a large company, the person who comes up with that is usually the one acknowledged as the smartest person in the meeting, or in a startup it is the founder.
And what we discovered is that that is typically a path to failure. In a startup almost every founder thought they were a visionary. But the data actually says 95% of them were hallucinating, and I'll contend the same is almost always true for new product creation inside of large corporations.
So The Four Steps to the Epiphany introduced the Customer Development Model, the challenge of meeting and understanding customers, and finding a market. I’m convinced that is even more applicable to existing companies attempting to launch new products into new markets than it is to startups.
Taking Lean to the entrepreneurial mainstream
Eric Ries’s contribution to Lean was to add the notion of Agile engineering. In the 20th century, almost everybody did waterfall development which was a serial process: alpha test, beta test, first customer ship. Eric observed that developing products iteratively — and interactively — was a great partner to the Customer Development process. Then adding to Customer Development and Agile engineering, Alexander Osterwalder came up with this notion of the Business Model Canvas — a strategic planning tool to tell us about all the important components that we need to worry about in a business.
And these three pieces — Customer Development, Agile engineering and Business Model Canvas — are what’s considered to be the Lean Startup method.
When you see these repeatable patterns [in action] within startups, you realize you’re onto a pattern that is quite useful if you want to move rapidly and make rapid decisions in an environment that’s chaotic and that has short decision cycles.
Which, if you think about it, is exactly what CIOs face today. It’s a big idea: when you had infinite time, and your competitors were your peers, you had time for waterfall development and the time to spend two to five years on major projects and rollouts. But you don’t have that time anymore. The whole company’s survival is dependent on your ability to continually innovate at a speed that is consistent with what’s going on now.”
• Portrait photography: Marc Olivier Le Blanc