Check out this lessons learned presentation from Angellist Founding Engineer Joshua Slayton. Apparently Angellist has a culture with no managers, no schedules, no code reviews, no tests. Instead they focus on constant deployment, constant customer support and constant hiring. This presentation gives some insights into how and why they do it. Good advice.
After this year’s Pirate Summit we decided to launch Exec I/O, a new event format to connect startup founders with corporate executives. There are five main reasons we think this makes a lot of sense:
There is a very high demand from corporates to somehow participate in the startup hype. However, most have no idea what and how to do it. Others start to build the 1.452nd startup accelerator.
There is a lot of value in startup culture and startup innovation methods. Corporates should know and incorporate what fits for them.
Startups at a certain stage are looking for partnerships. A cooperation with a corporate often makes a lot of sense.
Corporates are a likely exit channel for startups.
And finally: There just aren’t any events that focus on connecting (solely) corporate with startup executives.
The first event will be on 2 December in Düsseldorf. We are very happy that international law-firm Orrick will host the event. Top notch speakers such as Jörg Sievert (Managing Director, SAP Ventures), Frank Thelen (Managing Director, doo) or Christian Blume (CEO, Cleverbridge) will speak at the event. You can find the full list of speakers here. More will be added shortly.
The event is invitation only. You can apply here. If you enter “Lean Entrepreneur” as a referral code you will get 15% off the normal ticket price.
In case you haven’t noticed: times are changing. Technology – specifically the internet – is a central driver of this change. And technological change has accelerated in the last decades. Marc Andreesen referred to this a couple of years back as “Software is eating the world“. And if it hasn’t happened in your industry yet, be assured it will.
Smaller companies – often referred to as startups – have grasped the opportunity and have or currently are disrupting industries. Zalando for example has entered a fairly mature ecommerce market in 2009 and hit 1€ billion in revenue in 2012. It is now one of the leading ecommerce players in several countries. On the other hand some of the biggest companies in the (German) mail-order business had to closedown in the last years. Kodak invented(!) the digital camera in 1975 and filed bankruptcy in 2012.
Here is what is fascinating:
Big corporates have plenty of resources, a huge customer base, experts in market research etc. Why is it that they fail to innovate?
Startups most of the time lack resources, a customer base, experts in market research etc. How do they come up with innovative, disruptive and eventually successful business models?
Luckily both questions have been answered. Clay Christensen has described the answer to the first question in his book The Innovator’s Dilemma. Go read it, it is really good.
Steve Blank and Eric Ries have built a framework called The Lean Startup to answer the second question. Whereas the Lean Startup lays the theoretical foundation, the The Lean Entrepreneur – which I recently reviewed – explains the more practical side on how to disrupt markets and build a successful business.
What does that mean for corporates though? Turning a blind eye and waiting to be disrupted is certainly not a very smart idea. And many corporates are not ignoring change. As there might be a big discrepancy in perception to how fast the change will happen – most have so far underestimated its velocity – corporates know in general that they have to act. Most just don’t know what to do.
The most obvious way to take part in disruptive innovation is by acquiring or investing in startups. This is something corporates have been doing since decades. However, profitable investments are hard even for experienced VCs. Turns out that acquisitions are as well for various reasons.
I have consulted several companies that are going through the innovators dilemma. Some of the companies that are aware of the dilemma are trying a third approach. They want to connect with the startup world to learn how to build (incubate) new business ideas and get into the “startup game”.
This has led to a flood of incubators. Most of which will not be profitable because of mediocre management, war for entrepreneurial talent and lack of knowledge on how to build startups. However, on a broader scale I think it is a positive development. Corporates can learn plenty from startups. Young people can “test” entrepreneurship as a career path in a safe environment. If this helps more people to think and act entrepreneurial and more corporates to integrate elements of the startup mindset and method, I am all for it.
I have put together a slide deck which explains the innovators dilemma, how startups build businesses and what corporates can learn from them. It merely scratches the surface but it is a start for now. Tell me what you think in the comments.
A couple of weeks ago I announced that I would be doing a review of the Lean Entrepreneur a new book by Brant Cooper and Patrick Vlaskovits. Here it is.
I read a pdf version of the book so cannot say much about its “feeling”. As you can see it has a vivid cover and inside you can find similar illustrations as displayed on the cover.
The horizontal format needs a bit of getting used too. I got “lost” from time to time and needed to look for the ‘continuing’ column. It is a great format to display the illustrations though.
Goal of the book
In the introduction of the book the authors state their mission for writing the Lean Entrepreneur:
To describe why our economy is primed for a new wave of entrepreneurship using new methods of disruptive innovation.
To provide you real-world examples of how entrepreneurs are creating new markets and disrupting others.
To show you how you can get started creating value.
So far so good. This mission – though fairly accurate after reading the book – is still quite generic and could be the mission of many “Lean Startup” or “How to be a better Entrepreneur” books. What really makes this book stand out is its goal to be practical, hands-on and actionable. Also it focuses more on the (external) customer side of a business than on the (internal) development side.
“Most lean discussion and implementation focuses on product development processes (manufacturing, for example), if you look at the product from the customer’s point of view, they couldn’t care less about the product development process.”
Some general remarks about “The Lean Entrepreneur”
As The Lean Entrepreneur does not go into detail explaining those concepts (as there are those books mentioned above explaining them), it might be a good idea to be familiar with them. However, it isn’t essential to understand the book.
Target Audience of “The Lean Entrepreneur”
In general this book is useful for everybody that wants to start a business as well as all the stakeholders of the startup eco-system (including educators, government change agents, investors). However, it is less useful for
Small-business founders that are executing a known business model (e.g. backery, retail, franchise) or are in a well-known market
Solo practitioners (e.g. freelancers)
Also, it is not written to help an already successful small business owner become more efficient or for lifestyle business owners that are satisfied with current revenues.
Structure and table of contents
The book consists of 10 different chapters.
Vision, Values, and Culture
All the Fish in the Sea
Wading in the Value Stream
Data’s Double-Edged Sword
The Valley of Death
Real Visionaries Have Funnel Vision
The Final Word
Each chapter has various case studies, illustrations and a “Work to Do” segment (specific questions to apply to your own startup). The foreword is written by Eric Ries, the author of the popular above mentioned book The Lean Startup.
The Writing Style
It took me a couple of pages to get used to the style of writing. That being said, in general the writing is sharp and at times witty. The vocabulary – given you know the basics of the Lean Startup terminology – is clear and understandable.
Yet the writing isn’t always concise. Some chapters are a bit lengthy. However, not in a way that I have the feeling the authors desperately try to fill the pages. On the contrary, it quickly becomes obvious that they have deep knowledge about the topic.
And it might just be that combination of the complexity of the topic, the abundance of information and the urge to be witty/entertaining, which makes some chapters harder to read then others.
The book provides new tactics for practical application of Lean Startup theory. It does this by describing over two dozen case studies of Lean Startups and gives focused advice on how to segment the market, create a Value Stream, interact with customers, and create experiments.
There is a lot of wisdom in the book. Yet, it is not a disruptive book in the sense described in the book itself (based on Christensens theory of sustainable and disruptive innovation). And it isn’t trying to be that. Instead the book is very practical and hands-on.
It guides you through the day to day pitfalls of being an entrepreneur and offers practical solutions for many business challenges entrepreneurs face.
Some quotes from the book
Note: Many paragraphs of the book are quotable. Here is a random selection.
One of the first arguments of the book is that there are no visionaries, instead the vision is not as important as the drive to achieve it. This is a theme that is repeated throughout the book.
It’s not the vision that makes the visionary; it’s the driving force to make change happen.
As described there are many things in the book that have been said before and will not be new to the avid follower of popular Lean Startup blogs. Such as the description of Lean Startup in general.
Since what the startup is all about is unknown, one can’t organize let alone optimize employee activities around executing the creation of customer value. Instead, one must organize around learning. One must learn what the core value is; what solution provides that value; to whom it provides value; and how to market, sell, and deliver it so that the value is realized.
Or about failure and learning.
We are wrong before we are right. It’s the nature of learning.
And about scaling in a lean startup.
A lean startup is not ready to scale until the product itself is the best marketing tool.
The Lean Entrepreneur definitely has its strengths in the customer development chapters. Here is a quote about early adopters, market segmentation and knowing when product/market fit is reached.
Ironically, the way to go big is to focus small. You are more likely to discover what will go big by focusing on individual use cases. One of the biggest entrepreneur traps is to be all things to all people. Big companies get big by being a few things to a large number of groups of people. Although a plethora of feature requests might indicate a positive market signal, they are potentially fatal without knowing who they come from or why they are being requested.
And addionally about customer interviews and finding out whether you are really solving a customer need.
To truly understand a problem, you should not initially propose a solution. Otherwise, the reaction you get will be to the solution and not whether the problem exists.
Also throughout the book it becomes obvious that the authors don’t only have experience in helping startups “go lean” but they also give insights about the challenges corporates face who attempt to incorporate “lean practices”. Some of the insights are quite specific and valuable. And many things are quite familiar to what I have found in my work as a consultant. Here is one a bit more generic paragraph about big businesses and innovation.
Despite their best intentions of encouraging disruptive innovation, the very nature of asking, “What’s the ROI and when will I see it?” lures disruptive ideas toward sustained, modest innovation. To predict the market, you have to be in a known market. To disrupt, you must create new markets.
I really like that the Lean Entrepreneur is a very pragmatic common sense book. It doesn’t try to build up any complex theoretical models. Most importantly, insights are actionable and the templates and tactics given are useful. Overall it offers pragmatic and effient advice for entrepreneurs that act in an environment of extreme uncertainty.
It is noteworthy that it is not only useful for the typical startup entrepreneurs but can give good insights also for corporates who want to try lean innovation practices.
If you want to learn a scientific method for building a startup go read The Lean Startup. If you want to actually build your startup you should read The Lean Entrepreneur (afterwards). Whereas the former sets the mindset, the latter provides tools to execute on that mindset. So if you are looking for a guide to get you started with your startup, this is your book.
On a more general note: It is essential to bring the lean startup methodology into practice. There are many events (e.g. Startup Weekend, Startup Weekend NEXT) trying to do just yet. This is the first book I have seen go into such practical detail. And it does that well. That’s why I like the book and that’s why I recommend you read it too.
In business school I learned that money, quality and speed were the main competitive advantages. And yes, probably talent was somewhere in the mix as well.
Lately I have been thinking that, whereas these are certainly competitive advantages they are not so important anymore. Also I would argue that they become increasingly less sustainable.
Money: There is an abundancy of money around. A competitor could go for a serious “money/resource war”. Look at the Samwer brothers for example.
Quality: (Product) quality is certainly a more long-term strategy. Nevertheless, to a certain extend (product) quality can be copied. Look at China. Eventually certain quality criteria become basic/expected features and loose their “advantage”. The only strategy against that is innovation. Companies that don’t innovate will eventually end up competing on price.
Speed: Speed is – especially in the web economy- probably the most important one of these three. However, timing is important as well. It doesn’t do any good to be the first to be in a market that nobody cares about (yet). Also it shows that quite often not the first one in the market ended up winning it. Look at Friendster.
I believe in the age of increased transparency the above competitive advantages still matter. However, transparency fosters one competitive advantage which is hard to beat: trust.
Trust is very valuable. Yet, trust cannot be bought. The process of gaining trust is also very hard to speed up. Why? Because trust uses the only resource that is not scalable: time. That makes it a very sustainable competitive advantage.
Next to the time factor, gaining and maintaining trust is a lot of work. Maintaining it probably more so, since trust is a process and not an event. It builds on predictable and consistent behaviour. This is why authenticity and stability breads trust.
Obviously customers. employees, investors etc. will trust you if you are doing the right thing. Trust grows if you do it again and again. And this is only possible if you are truly passionate and if you do genuinely care.
Maybe it is a good idea to build your next business idea on trust as a central competitive advantage. It might not be easy but it may be very valuable in the long-run.
Above all, working in a trusting environment certainly feels good for everyone involved. And it is hard to argue against maximizing happiness.
I managed to get my hands on an early copy of what I hear is a “must-read” book: The Lean Entrepreneur. The book is written by Patrick Vlaskovitz and Brant Cooper and will come out in a couple of days.
Whereas “The Lean Startup” by Eric Ries has laid the theoretical foundation and described a more scientific model towards entrepreneurship, the “The Lean Entrepreneur” is all about actually doing it. Without knowing the book that’s already the first thing I like. The second thing is the name obviously…
Patrick, one of the authors, told me that if you purchase the book from their site until February 12th this year you actually have the chance to win several prices including a dinner with Dave McClure of 500 Startups.
I am really looking forward to read this book and will probably post my review in the next weeks.
Last week I wrote about business plans and planning. If you read the post you know that I am no big fan of business plans but think planning is important. One essential part for planning is to understand your business dynamics. These differ largely depending on industry, type of business and stage/maturation.
In many pitch decks the only “business dynamics” that can be found are the most obvious ones in the “financial section”. Entrepreneurs tend to write a table or build a fancy graph with their financial forecasts. Usually that includes revenue, costs, EBIT etc.
Interestingly these forecasts are often displayed in a very accurate way e.g. “in 2016 we will have a revenue of 7.025.231 €”. That obviously is a lot of crap. No entrepreneur actually knows what their sales will be. Not even for the next month (unless they are 0 €). Please stop pretending.
The truth is, forecasts are a lot of guess work based on assumptions. Most often these assumptions are based on an idealized world. Have you noticed that financial forecasts go nothing but up? That’s certainly not what is happening in the real world.
The problem is that these seemingly exact figures give a false sense of security. They are often build using elaborate Excel models. After a while of fine-tuning your model, you start thinking: “Yeah I got it now, this is what it’s going to be like”. I know what I am talking about. I have been there too many times.
Also building these models can be a lot of fun and it is easy to get caught up in fine-tuning it. The more you fine-tune, the more it will reflect the real world, right? Maybe. Maybe not. Quite frankly, it doesn’t matter if you are a bit more accurate about your revenue in 2016. Why? Because you will most probably be doing something different then. Yes, you will pivot. Most (if not all) young startups do.
That means: In 2016 you probably won’t be earning your money with what you think you will be earning it. There are just too many factors you cannot influence nor predict. You cannot model the real world!
What is important at an early stage is to know your business model and the business dynamics that drive it. It is e.g. important to understand what drives revenue/cost. In the early stage most of the time it is all about understanding who your customer is and how you can reach her. Depending on your business, stage etc. example questions could be something like this:
How do I get users?
How much does it cost to get users (user acquisition costs)?
How many users come back? What drives them to come back?
How many users will pay for my service? How much revenue does a user bring?
How many users will refer my service?
Hopefully you are measuring (most of) these dynamics. However, some answers you might have to estimate. That is okay. With your answers you build your model. Then you can use it to get insights about what drives revenue/cost etc. However, instead of looking at absolute numbers look at dependencies e.g.:
If I increase my conversion rate by 1%, what would happen ro my revenue?
If I reduce marketing spend, what would happen to profits?
If I can keep customers longer, what would happen to referrals?
If more people came through referrals how much more money could I spent on marketing?
This can give you a good sense about where to focus on next. After all, it doesn’t really matter if your model predicts 7, 15 or 20 million € in revenue in 3 years. What matters is to get from 0€ revenue to 1.000€ revenue and from there to 10.000€.
You aren’t there yet. Fantasizing about how much money you are going to make in 5 years doesn’t make you any money now. Building an elaborate model doesn’t get you new users.
Put away your forecasts and models and focus on making progress and getting traction.
Die Neuauflage des European Pirate Summit 2012 (Disclaimer: Ich bin Mitorganisator) findet am 10. und 11. September statt. Damit geht für mich die “Pirate Season” los. Ein halbes Jahr Vorfreude. Ich bin mir sicher auch dieses Jahr wird es wieder legendär.
Der Summit richtet sich an Entrepreneure, die sich von dem “Manifest” von Michael Arrington “Are you a pirate?” angesprochen fühlen. Schon 2011 waren viele internationale Teilnehmer auf dem Event, es gab eine Reihe namhafter Speaker, die Location war einzigartig und das Feedback der Teilnehmer sehr positiv. Deutsche Startups hat den Pirate Summit sogar zur Veranstaltung des Jahres gewählt.
Wen das noch nicht überzeugt, hier ein paar Eindrücke von letztem Jahr.
Im April findet das Balkan Venture Forum statt. Es ist eine Konferenz für Entrepreneure, Investoren und das Startup-Öko-System des Balkans. Der Balkan und Ost-Europa insgesamt sind spannende Märkte, weil sich noch so viel im Aufbruch befindet.
Auf dem Forum wird es auch Startup-Pitches geben (es ist ja ein Venture-Forum). Aleksandar Tasev, der Organisator des Events, hat zur Vorbereitung ein “Investor Readiness Training” angeboten. Dabei konnten interessierte Startups bzw. Entrepreneure Präsentationen zu Themen wie “How to pitch?”, “Generating Business model and Business planning” oder “Legal issues in startups and VC”.
Auch ich durfte eine Präsentation halten, die ich schamlos “How Pirates build Products” genannt habe. Dabei geht es um die Basics der Lean Startup Methode, die entscheidend von Eric Ries und Steve Blank geprägt wurden. Die Präsentation habe ich auch auf Slideshare hochgeladen.
Übrigens sind rund 40 Teilnehmer dem Aufruf gefolgt und in das Messezentrum nach Skopje gekommen. Ich habe es nicht nach Mazedonien geschafft, sondern habe die Präsentation über Skype gehalten. Im April werde ich aber wahrscheinlich auf dem Balkan Venture Forum in Skopje sein.
I just heard that Steve Jobs has passed away. Although I am not an Apple fanboy I truly admire and respect what Steve Jobs has done for the tech world, the web economy, the music industry, the phone industry, design thinking, usability, entrepreneurship, the startup community, leadership and so much more. Thank you Steve!
Here is probably the most remarkable speech by Steve Jobs, which gives great insights into his way of thinking. It is truly inspirational and an absolute must watch.
Here are some links relating to Steve Jobs that I posted in the last years: