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Those two fundamental precepts crystallized for me during my career as an entrepreneur. When I shifted into teaching, a decade ago, I came up with the formula for customer development described earlier. In , I invested in a start-up founded by Eric Ries and Will Harvey and, as a condition of my investment, insisted that they take my course. The tools were popularized by a series of successful books. In , I wrote The Four Steps to the Epiphany, articulating for the first time that start-ups were not smaller versions of large companies and laying out the customer development process in detail.
In , Alexander Osterwalder and Yves Pigneur gave entrepreneurs the standard framework for business model canvases in Business Model Generation. In Eric published an overview in The Lean Startup. The lean start-up method is now being taught at more than 25 universities and through a popular online course at Udacity. At such gatherings a roomful of start-up teams can cycle through half a dozen potential product ideas in a matter of hours.
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While some adherents claim that the lean process can make individual start-ups more successful, I believe that claim is too grandiose. Success is predicated on too many factors for one methodology to guarantee that any single start-up will be a winner. A lower start-up failure rate could have profound economic consequences. Today the forces of disruption, globalization, and regulation are buffeting the economies of every country.
Established industries are rapidly shedding jobs, many of which will never return. Employment growth in the 21st century will have to come from new ventures, so we all have a vested interest in fostering an environment that helps them succeed, grow, and hire more workers.
In the past, growth in the number of start-ups was constrained by five factors in addition to the failure rate:. Only after quick rounds of experimentation and feedback reveal a model that works do lean founders focus on execution. The high cost of getting the first customer and the even higher cost of getting the product wrong. The limited number of people with an appetite for the risks inherent in founding or working at a start-up. The structure of the venture capital industry, in which a small number of firms each needed to invest big sums in a handful of start-ups to have a chance at significant returns.
The concentration of real expertise in how to build start-ups, which in the United States was mostly found in pockets on the East and West coasts. This is less an issue in Europe and other parts of the world, but even overseas there are geographic entrepreneurial hot spots. The lean approach reduces the first two constraints by helping new ventures launch products that customers actually want, far more quickly and cheaply than traditional methods, and the third by making start-ups less risky.
And it has emerged at a time when other business and technology trends are likewise breaking down the barriers to start-up formation. The combination of all these forces is altering the entrepreneurial landscape. Today open source software, like GitHub, and cloud services, such as Amazon Web Services, have slashed the cost of software development from millions of dollars to thousands.
Hardware start-ups no longer have to build their own factories, since offshore manufacturers are so easily accessible. Once its founders had finished testing and iterating on the design of their wired dollhouse kit, they sent the specs off to a contract manufacturer in China. Three weeks later the first products arrived. Large companies, such as GE and Intuit, have begun to implement them. Another important trend is the decentralization of access to financing.
Venture capital used to be a tight club of formal firms clustered near Silicon Valley, Boston, and New York.
Worldwide, hundreds of accelerators, like Y Combinator and TechStars, have begun to formalize seed investments. And crowdsourcing sites like Kickstarter provide another, more democratic method of financing start-ups. Before the internet, new company founders got advice only as often as they could have coffee with experienced investors or entrepreneurs. Today the biggest challenge is sorting through the overwhelming amount of start-up advice they get.
The lean concepts provide a framework that helps you differentiate the good from the bad. Lean start-up techniques were initially designed to create fast-growing tech ventures. But I believe the concepts are equally valid for creating the Main Street small businesses that make up the bulk of the economy. If the entire universe of small business embraced them, I strongly suspect it would increase growth and efficiency, and have a direct and immediate impact on GDP and employment.
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There are signs that this may in fact happen. In the U. National Science Foundation began using lean methods to commercialize basic science research in a program called the Innovation Corps. Eleven universities now teach the methods to hundreds of teams of senior research scientists across the United States. MBA programs are adopting these techniques, too. For years they taught students to apply large-company approaches—such as accounting methods for tracking revenue and cash flow, and organizational theories about managing—to start-ups.
Yet start-ups face completely different issues. Now business schools are realizing that new ventures need their own management tools. And the business plan competitions that have been a celebrated part of the MBA experience for over a decade are being replaced by business model competitions. Harvard Business School became the latest to make this switch, in Stanford, Harvard, Berkeley, and Columbia are leading the charge and embracing the lean start-up curriculum. My Lean LaunchPad course for educators is now training over college and university instructors a year.
Corporations have spent the past 20 years increasing their efficiency by driving down costs. But simply focusing on improving existing business models is not enough anymore.
mta-sts.builttospill.reclaimhosting.com/honeywell-rth7500d-manual-operativo.php Almost every large company understands that it also needs to deal with ever-increasing external threats by continually innovating. To ensure their survival and growth, corporations need to keep inventing new business models. This challenge requires entirely new organizational structures and skills. During the past three years, however, we have seen large companies, including General Electric, Qualcomm, and Intuit, begin to implement the lean start-up methodology.
In Prescott Logan, the general manager of the division, recognized that a new battery developed by the unit had the potential to disrupt the industry. Instead of preparing to build a factory, scale up production, and launch the new offering ultimately named Durathon as a traditional product extension, Logan applied lean techniques.