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Steve Blank: How to Build a Great Company, Step by Step | 8.14.12
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Steve Blank: How to Build a Great Company, Step by Step Join Silicon Valley serial entrepreneur-turned-educator Blank in a lively discussion with Dan'l Lewin of Microsoft. This program will introduce best practices, lessons and tips that have swept the startup world, offering a wealth of proven advice and information for entrepreneurs of all stripes. Hear about a tested and proven Customer Development Process, helping get it right --and how to "get, keep, and grow" customers. Steve Blank, Serial Entrepreneur; Founder, E.piphany; Professor, UC Berkeley and Stanford Engineering; Author, The Startup Owners Manual In conversation with Dan'l Lewin, Corporate Vice President of Strategic and Emerging Business Development (SEBT), Microsoft 💯SUBSCRIBE for more VIDEOS: https://www.youtube.com/user/commonwealthclub 📆 UPCOMING EVENTS: https://www.commonwealthclub.org/events 🎉 BECOME a MEMBER: https://www.commonwealthclub.org/membership 💰 DONATE NOW: https://support.commonwealthclub.org/sslpage.aspx?pid=298 📺➕📻 Watch & Listen https://www.commonwealthclub.org/watch-listen The Commonwealth Club of California is the nation's oldest and largest public affairs forum 📣, bringing together its 20,000 members for more than 400 annual events on topics ranging across politics, culture, society and the economy. Founded in 1903 in San Francisco California 🌉, The Commonwealth Club has played host to a diverse and distinctive array of speakers, from Teddy Roosevelt in 1911 to Hillary Clinton in 2010. Along the way, Martin Luther King, Ronald Reagan and Bill Clinton have all given landmark speeches at the Club.
Segments Timeline
Introduction to Building a Great Company
Kevin O'Malley introduces the program featuring Steve Blank, a renowned entrepreneur and educator, discussing the essential steps to building a successful company. The conversation will cover best practices and insights from Blank's extensive experience in the startup world, setting the stage for a deep dive into customer development and business models.
"Good evening and welcome to tonight's program with the Commonwealth Club of California. My name is Kevin O'Malley. I'm Chairman of the Business and Leadership Forum here at the club. And I'm your host..."
Startups vs. Large Companies
Steve Blank shares a critical insight: startups are not just smaller versions of large companies. He emphasizes that while large companies execute known business models, startups are in search of their business model. This distinction is crucial for understanding the unique challenges and strategies that startups face in their early stages.
"Terrific. Well, thank you. Steve. Daniel, Here you go. All right. So we thought we kicked this thing off by framing the broad question right up front. And we want you all to be paying attention and th..."
The Business Model Revolution
Blank discusses the evolution of business planning, highlighting that traditional business plans are often just untested hypotheses. He introduces the concept of the business model as a more effective framework for startups, emphasizing the importance of understanding customer segments and value propositions to achieve product-market fit.
"So there's a lot of accumulated experience that that goes into this distillation that you just just really so nicely framed. That's because I've gotten it wrong a. Lot, guys. Gotten it wrong a lot. So..."
Customer Development for All Businesses
Steve Blank explains that the principles of business model design and customer development apply not only to tech startups but to all types of businesses. He critiques outdated business planning methods and advocates for experiential learning, encouraging entrepreneurs to engage directly with customers to validate their business ideas.
"And the two most important on day one is What am I making and for who? Which we call product market fit. Hmm. I was going to ask it on that point. When you have. Does this apply to all businesses or i..."
The Importance of Customer Feedback
In this segment, Blank emphasizes the necessity of customer development, which involves getting out of the building to test assumptions about customer needs and solutions. He argues that understanding customer feedback is vital for turning initial hypotheses into validated facts, regardless of whether the product is digital or physical.
"As you well know, every major corporation in the 21st century is dealing with the issues of disruption. Sure, right. Everybody. And the interesting thing is disruption on day one looks like a toy. In ..."
Listening Over Selling
Steve Blank stresses the importance of listening to customers rather than pushing products. He highlights that successful customer development requires entrepreneurs to ask questions about customer needs and problems, rather than focusing solely on selling their solutions. This approach fosters genuine engagement and valuable insights.
"And some of you are actually like looking at your shoes, being a little embarrassed right now. So the process we talk about to turn those hypotheses into facts is called customer development and custo..."
The Dangers of Assumed Success
Blank warns entrepreneurs about the pitfalls of assuming success based on initial funding or interest from investors. He explains that many startups mistakenly believe that securing funding means their ideas are validated, leading them to execute plans without further customer validation, which can result in failure.
"So do you. Do that in the open or do you do that in kind of stealth mode? As people talk about for startups, what's the right way to go about that? Well, now the right way is the only way I could get ..."
Founder Vision and Team Dynamics
In this closing segment, Blank discusses the role of the founder's vision in shaping company culture and team dynamics. He cautions that passion can lead to a distorted perception of reality, urging founders to remain open to feedback and critical self-reflection as they build their teams and pursue their business goals.
"So what's the culture issue then in an organization? Because I mean, one of my observations before I worked at Microsoft, I did a series of startups, and one of my observations is, is that, you know, ..."
The Importance of Customer Development
Steve Blank stresses the necessity for founders to step outside their comfort zones and engage with customers directly. He shares insights on how founders should prioritize customer development over traditional sales roles, illustrating the importance of gathering real feedback to refine their business models.
"Instead, what you have, what usually plays out is the founder hires a VP of sales and VP of sales. Then I'll. Get going. Go talk to those customers. Absolutely. You talk. To a bunch of customers. And ..."
From Failure to Failure
Blank discusses the iterative nature of startups, explaining that they often go from failure to failure. He emphasizes the importance of pivoting and adapting the business model rather than simply replacing executives when things go wrong, highlighting a more sustainable approach to growth.
"That's one idea about people. The second idea, and this goes back to what we learned is the mistake that startups make. And I used to make this all the time. Big company exec, VP, Sales, VP of Marketi..."
Defining a Startup
In this insightful segment, Blank provides a clear definition of a startup as a temporary organization designed to search for a scalable and repeatable business model. He elaborates on the significance of this definition and the mindset required for founders to successfully navigate the startup landscape.
"So so what we now know and here's here's the the story how it used to play out and what we've now come up with in the old days, if you were a startup, you would do, you know, you would raise money, en..."
The Secret Memo for Founders
Steve Blank reveals the 'secret memo' that most founders never receive, outlining the three phases a startup goes through: searching for a business model, building the company, and scaling it. He discusses the challenges founders face in transitioning from startup to established company and the importance of aligning interests with investors.
"Now, if you just deconstruct that a startup as a temporary organization to pad because it's kind of fun to have your dog and free food and whatever. But the goal is not to. Be a ten year old startup. ..."
Navigating Growth and Transition
In this concluding segment, Blank talks about the transition from building to scaling a startup. He emphasizes the need for founders to adapt their leadership style as the company grows and the importance of recognizing when to bring in operational executives to manage the complexities of a larger organization.
"Really goes through three phases. One is the search for the business model. Those are done by insanely crazy people where chaos is the norm right? You're searching for one thing. On one day you're goi..."
Reflecting on Founder's Strengths
In this segment, Blank reflects on the qualities of successful founders and the importance of self-awareness. He highlights that while many founders may not be well-rounded individuals, they can build effective teams by recognizing their strengths and weaknesses. Blank encourages founders to be reflective about their capabilities and to seek out complementary skills in their teams.
"But there really to me are three phases to the company search, build and execute. Interesting. So I have a question about the sort of reflective nature of a successful founder, someone who can transit..."
Learning from Failure
Steve Blank shares a personal story about losing $35 million in a failed startup, illustrating the cultural perception of failure in Silicon Valley as a learning experience. He discusses how the American entrepreneurial culture views failure as a stepping stone to success, allowing founders to gain valuable insights and multiple opportunities to succeed despite setbacks.
"How should a founder think about that? You know, one of the things I found just personally, I did eight startups and I had two craters. One so deep it left its own iridium layer. That's and by the way..."
The Role of Metrics in Startups
Blank emphasizes the critical role of data and analytics in early-stage startups. He argues that successful founders must be adept at recognizing patterns in data rather than merely focusing on numbers. This segment highlights the importance of understanding customer needs and adapting business strategies based on insights gained from data collection.
"And so I forgot what your question was. By one thing. It's more about, okay, so so you don't want to fail, you want to win and and you want to you want to recognize your limitations, if you will. So t..."
Aligning Technology with Customer Needs
In this segment, Blank discusses the misconception that having a strong patent portfolio guarantees success for startups. He stresses that the key to a successful business lies in aligning technology with customer needs and finding a market fit. Blank advises entrepreneurs to focus on understanding their customers and ensuring that their technology meets real market demands.
"And I thought. Bill Gates did a model was. Brilliant at it, no question about it. And then others need more total control and sometimes will slash and burn out and then can come back after they've acc..."
Audience Engagement: Q&A Introduction
Kevin O'Malley introduces the audience to the Q&A segment of the discussion with Steve Blank. He encourages attendees to ask insightful questions, setting the stage for an interactive dialogue about building great companies.
"Perfect. Well, great. I want to make sure that people in the audience have a chance. So if anyone wants to start a queue around the microphones, I'd appreciate that. Great. Thank you. And I would like..."
Navigating Complex Customer Environments
John Wolpert shares his experience in the taxi industry, discussing the challenges of a complicated customer environment with conflicting interests. He introduces the concept of the 'intention graph' as a way to understand customer needs and market dynamics.
"And for to hear what you have to say. Ready to. Go? Is that the best question? Yes, it's the. First question. I've got a hypothesis I perfect. I'm John Wolpert. I'm one of the founders of Upstart Mobi..."
Understanding Multi-Sided Markets
Steve Blank explains the intricacies of multi-sided markets, using examples like Google and the medical device industry. He highlights the importance of recognizing different stakeholders and their unique value propositions in order to successfully navigate complex business landscapes.
"Say, It sounds like time for you to read your book? But, you know. One of the interesting things and it sounds like and then correct me if I'm wrong, is in your business, you discovered that there wer..."
Charting Value Propositions
Blank discusses the necessity of mapping out value propositions for each side of a multi-sided market. He emphasizes that understanding these relationships is crucial for entrepreneurs to effectively model their business strategies.
"And it's those intricacies that you were actually modeling and their influence with each other that I think you were working for. Was that correct? And so so just understanding the fact that there mig..."
Ageism in Entrepreneurship
In response to a question about age in the startup world, Steve Blank challenges the stereotype that entrepreneurship is only for the young. He cites statistics showing that many successful entrepreneurs are older and possess valuable experience, advocating for inclusivity in the startup ecosystem.
"Another question over there. Hi, Steve. Thanks. So I'm what VCs don't want to hear in a presentation. I'm an idea guy, and my ideas have worked in corporate life for many, many years. You know, I cons..."
Testing Your Business Idea
Blank advises aspiring entrepreneurs to validate their business ideas by testing their assumptions with potential customers. He stresses the importance of gathering feedback and iterating on the product before fully committing to a team or development process.
"The one is building a team and hearing you go out for the first time, you know, the first order bit, the first thing I would just remind you before you commit to lots of team and energy, etc., is star..."
Scaling Customer Development
A participant asks about scaling customer development efforts beyond the founder. Blank suggests hiring sales closers to validate the sales process and emphasizes the need for flexibility in adapting sales strategies as the business model evolves.
"without going through the entire development process. And it could be that you might be the corner case that needs to build the whole thing. I have yet to see that except for an entire nuclear reactor..."
The Role of Sales in Startups
Steve Blank shares insights on the importance of founders being involved in sales early on. He warns against hiring a VP of sales too soon and stresses that founders should learn how to engage with customers to ensure they understand the market.
"So and and again, I'm going to just remind you everything I say here. It's not the way it's a way. Okay. And a way to think about this is what you, the founders, are trying to rapidly is to be the sho..."
Understanding B2B Sales Dynamics
In a discussion about B2B sales, Blank highlights the need for founders to understand the complexities of their target market, including identifying users, payers, and potential saboteurs within organizations. He emphasizes the importance of mapping out the 'order of battle' in sales.
"And Ben. And by the way, I could train engine engineers to do this. Who the difference between an introvert and an extrovert when I get them is whether they're looking at their shoes or your shoes. An..."
Adapting Business Models for New Products
A participant discusses the challenges faced by a company launching a new product under an existing business model. Blank responds by explaining how large companies must adapt to new market contexts and the importance of innovating beyond traditional models.
"There are good models to pick from for sure, and I think that's very available Now. The question. Hi, I'm doing some work with a company that's about ten years old and they've developed really well. S..."
The Challenge of Creativity in Large Firms
Steve Blank humorously addresses the difficulty large companies have in fostering creativity. He contrasts the execution-focused culture of established firms with the agility of startups, pointing out that successful companies often prioritize process over innovation. This segment underscores the inherent challenges in encouraging creative thinking within structured environments.
"But any successful going concern will be trapped by the model. And as the market context changes and technology is certainly a key driver in that change, the Internet changes everything. It removes di..."
Microsoft's Ecosystem for Innovation
Dan'l Lewin outlines Microsoft's approach to fostering innovation through partnerships and outreach programs. He discusses initiatives like Dream Spark and Microsoft Innovation Centers, which support young entrepreneurs and developers. This segment illustrates how large corporations can engage with emerging businesses to adapt and thrive in changing markets.
"Is they went home rich or the other ones left, etc.. And this is not anybody doing anything devious bad. But in fact how large companies succeed is they build execution engines. That is, people who ar..."
Confronting Sales Challenges
Steve Blank provides practical advice for startups struggling to convert interest into sales. He emphasizes the importance of understanding customer pain points and being assertive in sales conversations. This segment offers actionable insights for entrepreneurs facing the common hurdle of securing orders despite positive feedback.
"So that's what we're doing. And he's being modest. I've been in various cities around the world in things that weren't even directly related to Microsoft finding They were sponsored by by your group. ..."
Key Takeaways for Entrepreneurs
In the closing remarks, both speakers summarize their insights on entrepreneurship. They stress the importance of taking action and engaging with customers outside the building to validate business ideas. This segment encapsulates the core message of the discussion, encouraging entrepreneurs to be proactive in their approach to building successful companies.
"Does that answer. Your question or not? Right. So. So you need to I mean, literally, I didn't do this all night, but you truly need one of these, right here. I'm going to give you this one because thi..."