ST. PETE BEACH — Entrepreneur and business scholar Steve Blank has spent decades asking questions about startups — What makes them unique? What makes them work? What makes them grow? — that led to the creation of an innovation strategy known as the lean start-up method.
On Saturday, Blank, 65, is scheduled to receive a lifetime achievement award at the annual conference of the U.S. Association for Small Businesses and Entrepreneurship. His work, along with that of Alexander Osterwalder and Eric Ries, has led to changes in how business and innovation is taught from Stanford University, where he teaches, to the National Science Foundation, to scores of campuses nationwide, among them the University of South Florida.
On Friday, Blank talked about what he's learned along the way. Here's the interview, edited for length:
Q — One of your main ideas is that startups are not smaller versions of large companies. Why not?
Blank: When a company's large, it already knows a lot of things. It knows who its customers are. It knows what products they want. It knows how to price.
What was never obvious for a long time is that startups don't know any of that stuff. In 21 years, I had done eight startups, and the one given was, "No business plan ever survived first contact with customers." But no one had ever stepped back and said maybe startups need different tools, different techniques.
That was pretty heretical at the time. Business schools had made reputations teaching how to write a business plan. It was the capstone class.
Q — So what are the key approaches of the lean startup method?
Blank: One is, there are no facts inside your building, so get the hell outside. As smart as you are as founders, all you have is a series of untested hypotheses. Almost always, those hypotheses are wrong.
There are two more components. One is that instead of building the entire product from start to finish and releasing it a year later we now have tools and techniques — something called agile engineering — to build products incrementally and iteratively, so as we get customer feedback, we can change what we're building before we build the wrong thing.
The other is that in the old days we'd ship a product and expect sales to come in per plan. They almost never did, and depending on how much cash we had, we'd eventually fire the VP of sales. A key part of lean says, we're allowed to fire the plan or parts of the plan as early as possible when we discover the plan is wrong. That modification, called a pivot, is a key part of lean. Instead of firing people first, we're going to see whether our assumptions were correct and fire the assumptions first.
Q — What should the Tampa Bay area do to build its innovation ecosystem?
Blank — The question is, can you build an ecosystem here where people stay or do people go? Is it a magnet for people elsewhere? The mistake local politicians typically make is that this is a jobs creation program for the local populace. Not really. A healthy ecosystem attracts people.
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Tampa has a lot going for it. Besides the weather and young entrepreneurs, it has a great military presence with U.S. Special Operations Command and potential dual-use military apps and startups that are something one might consider building an ecosystem around.
There's a ton of money in the bay area here. The question is why isn't all that money doing what (Jeff Vinik, who is spending $10 million to create the nonprofit support organization Embarc Collective) is doing? If people understand how valuable that is, you literally can build the ecosystem.