This is an introduction to the basics of entrepreneurship, lean startup methodology, and effectuation principles. It is preparatory viewing for the first session of a course on entrepreneurship taught by global cleantech entrepreneur and Entrepreneur In Residence at Rice University, Bryan Guido Hassin. The full video is available at http://youtu.be/JYUJP3hxBn4
2. This is how people believe
entrepreneurship happens
2
Wunderkind
has divine
inspiration
• Or MBA has
genius insight
Raise huge
VC $$$
• With detailed
business plan
IPO, retire
• Preceded by
hockey stick
growth
3. But this is not how
entrepreneurship usually happens
3
Wunderkind
has divine
inspiration
• Or MBA has
genius insight
Raise huge
VC $$$
• With detailed
business plan
IPO, retire
• Preceded by
hockey stick
growth
• First time
founders
average 40
years old
• Ventures
rapidly evolve
from original
vision
• < 2% of
ventures ever
raise VC $$$
• < 27% of Inc.
500 ever had
a biz plan
• < 1% of
ventures IPO
4. I am a global cleantech entrepreneur /
professor of entrepreneurship at Rice
4
• Founded/led four startups
– Plug-and-play office energy savings
– Web environmental compliance
– Digital social business card
– Mobile/wireless disaster response
• Educated at Rice (computer science) and IMD
(business)
16. Entrepreneurship is…
• A mindset
– Seeking solutions to problems
– Aligning resources to sustain solutions
– Creating value
16
17. There are 5 canonical venture
types
• Small business (feed the family)
• Large business sustaining innovation
• Large business disruptive innovation
• Social enterprise
• Scalable startup
Source: Four Steps to the Epiphany
Our Focus
17
18. A startup is…
―a temporary organization used to search for a
repeatable and scalable business model” – Steve
Blank
Large Companies
Execute Known
Business Models
Ventures Search for
Unknown Business
Models
18
19. Startups are not small versions of
large businesses
Large Companies
Execute Known
Business Models
Ventures Search for
Unknown Business
Models
19
21. What does this entrepreneurial
search process look like?
22. A business model starts with
hypotheses
Guess Guess
Guess
Guess
Guess
Guess
Guess
GuessGuess
23. Hypotheses become facts through rapid
iterations of customer development
Company
Building
Customer
Discovery
Customer
Validation
Customer
Creation
Pivot
Source: Four Steps to the Epiphany
23
24. Get out of the building and test
hypotheses with real clients
• Stop selling, start listening
• Test your hypotheses
• Continuous Discovery
• Done by founders
Customer
Discovery
Customer
Validation
Company
Building
Customer
Creation
Source: Four Steps to the Epiphany
24
25. When hypotheses are not verified
by customers, pivot
• The heart of Customer Development
• Iteration without crisis
• Fast, agile and opportunistic
Source: Four Steps to the Epiphany
25
26. Goal to exit Customer Validation:
the MVP
•MVP: The Minimum Viable Product
•Smallest feature set that gets you the most …
orders, learning, feedback, failure…
Source: Four Steps to the Epiphany
26
27. Sounds easy – yet so many
entrepreneurs still fail
New research on consistently successful entrepreneurs
29. Expert entrepreneurs start with
means and create opportunities
Fixed
End
Means
1
Means
2
Means
3
Starting
Means
New
End
1
New
End
3
New
End
2
Source: Effectual Entrepreneurship
29
30. Expert entrepreneurs expand their
means with partnerships
Source: Effectual Entrepreneurship
30
Your
Means
Original
End
4
Original
End
6
Original
End
5
My
Means
Original
End
1
Original
End
3
Original
End
2
New
End
3
32. Expert entrepreneurs set
affordable loss and control returns
Source: Effectual Entrepreneurship
32
Entrepreneurs
For a given level of risk, entrepreneurs feel
they
can expand the problem space and
increase returns
For a given level of return, bankers feel
they can
reduce the problem space and decrease
risk.
Step 2
Push creatively
to increase return
Step 2
Try to reduce risk
through insurance, etc.
Step 1
Pick a comfortable
level of risk
Step 1
Pick a target return
Risk
Return
High High
LowLow
Low Low HighHigh
Bankers
Risk
Return
33. Expert entrepreneurs control the
unpredictable future
Source: Effectual Entrepreneurship
33
Biz Plan
Entrepreneurship
34. Effectual principles can be
illustrated with jars of marbles
?
1: Predictable 2: Risky 3: Unknowable
You win the game by selecting a red marble
Entrepreneurship is like Jar 3
35. Expert entrepreneurs add as
many red marbles as they can
3: Unknowable
And they make friends who have more red marbles to add
You win the game by selecting a red marble
36. Or else they create a new game
where blue marbles win
3: Unknowable
You win the game by selecting a blue marble
If they and their friends only have blue marbles
37. Innovation happens throughout
the business system
6. Product system
extended system that surrounds an offering
Product
performance
Offering
Product
system
Service
7. Service
how you service your customers
5. Product performance
basic features, performance and functionality
Core
process
Process.
Enabling
process
3. Enabling process
Enabling new connections,
interactions, and transactions
4. Core process
proprietary processes that add value
Source: Doblin Group
Business
model
Finance
Networking
2. Networking
enterprise’s structure/
value chain
1. Business model
how the enterprise makes money
Channel
Delivery
Brand Customer
experience
10. Customer experience
The overall experience for
customers
8. Channel
how you connect your offerings
to your customers
9. Brand
how you express your offering’s
benefit to customers
37
38. Source: Doblin Group
Hi
Lo
Volume of innovation efforts
Last 10 years
Core
process
Process.
Enabling
process
Business
model
Finance
Networking Product
performance
Offering
Product
system
Service Channel
Delivery
Brand Customer
experience
Startups tend to focus on product
opportunities
38
39. But the best opportunities are
often elsewhere
Source: Doblin Group
Hi
Lo
Cumulative value creation—
Last 10 years
Core
process
Process.
Enabling
process
Business
model
Finance
Networking Product
performance
Offering
Product
system
Service Channel
Delivery
Brand Customer
experience
39
40. The innovation ―piano:‖ the best
opportunities are ―chords‖
Source: Doblin Group
Channel
Delivery
Brand Customer
experience
10. Customer experience
The overall experience for
customers
8. Channel
how you connect your offerings
to your customers
9. Brand
how you express your offering’s
benefit to customers
6. Product system
extended system that surrounds an offering
Product
performance
Offering
Product
system
Service
7. Service
how you service your customers
5. Product performance
basic features, performance and functionality
Core
process
Process.
Enabling
process
3. Enabling process
Enabling new connections,
interactions, and transactions
4. Core process
proprietary processes that add value
Business
model
Finance
Networking
2. Networking
enterprise’s structure/
value chain
1. Business model
how the enterprise makes money
40
41. Example: Apple’s iPod/iTunes ―chords‖
have captured huge opportunity
Channel
Delivery
Brand Customer
experience
Product
performance
Offering
Product
system
ServiceCore
process
Process.
Enabling
process
Business
model
Finance
Networking
41
42. Breakout
• What are your means?
• What is your affordable loss?
• What can you do to control the future
instead of predict it?
• Which areas of non-product innovation
can you explore?