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Game-Changing Lessons From Lean Start-Up Founder Steve Blank

Steve Blank is one of the founders of the lean start-up movement. In this exclusive interview he unpacks the fundamental mistakes start-up founders make.

GG van Rooyen

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Steve Blank is one of the progenitors of the lean start-up movement. Many of the principles that now form the foundation of the lean methodology were first introduced by him.

His books The Startup Owner’s Manual and The Four Steps to the Epiphany have become indispensable fonts of information for those looking to create a lean start-up. He sat down for an exclusive interview with Entrepreneur SA for this article.

One of your most famous sayings is: Start-ups are not smaller versions of large companies. What do you mean by this?

This seems so intuitive, that I was surprised that in a hundred years, no one ever explicitly articulated this. Existing companies execute known business models.

Related: The Start-Up Crash Diet

That’s a fancy way of saying existing companies know who their customers are, they’re aware of their competitors, they have distribution channels and they know what features any offering should have.

They know all this because it has been figured out through trial and error. So the core thing they need to do is to execute the existing model.

What people never understood is that this is not what start-ups do. For a long time, start-ups were operating like existing companies. The problem was, they were just guessing. They shouldn’t have been executing, they should have been searching for a business model.

This distinction between search and execution had never been articulated. And even if it had been articulated, there were no tools or strategies to do anything with that information. That is where the lean start-up movement comes in. It teaches start-ups how to search for a business model.

You’ve called a start-up a series of untested hypotheses. Why is a business plan unsuited to this situation?

A business plan makes all the sense in the world within a large corporation, when you’re executing a plan. The core of a business plan is a five-year model, which is fine when you’re in an existing company.

That document simply doesn’t work in a start-up, because it doesn’t survive first contact with customers. There is a series of unknowns, so, for a start-up, a business plan is nothing more than creative writing.

You call a start-up a temporary organisation. Why is it ‘temporary’?

A start-up is a fun place to be. You get to bring your dog, you get free food; it’s great. Emotionally, it’s a very satisfying place. But the goal is not to be a start-up — the goal is to become a large company.

Related: 6 Things I Wish Somebody Had Told Me When I Started My Small Business

You want to ultimately exit that comfortable place and scale. So, being a start-up should be a temporary situation.

You’re known for the mantra: ‘Get out of the building’. What exactly is the intention of this instruction? If you’re a founder, you believe you’re a visionary. You believe you understand the problem, and you have the solution, so all you need to do is build the product.

It’s great to be passionate and believe in what you’re doing, but the reality is, you have no facts. So I encourage founders to write down all their hypotheses with regards to who their customers are and what they want, and take that information out into the street.

I tell them to just find ten people who agree with them completely. Of course, rarely do they turn out to be right. About 99 out of 100 find that their hypotheses were incorrect.

So getting out of the building is really the core of the lean start-up movement. By getting out of the building and validating your hypotheses before you’ve spent too much time and resources on your idea, you compress the start-up process, which means creating a business becomes more efficient.

That said, it’s not about ‘failing’. There’s a myth surrounding lean start-up that it’s about ‘failing early’. It’s about learning. Failure implies you’ve completely blown it or simply gone home and quit.

Learning is something very different. We don’t say that scientists have failed because their theory has been disproved. It is a process of discovery. Lean start-up is similar, which is why I call it the scientific method for entrepreneurship.

Customer development is not selling. It’s about listening. Can you talk a little about this and briefly explain what the process is actually about?

If you’re selling, all you’re really doing is overlaying your view of the problem and solution onto potential customers. What you really want to do is to try and understand the problems of potential customers, and how you might solve them.

You need to find out if you have product/market fit. If you don’t find this out, you’re going to struggle a lot more when you do try to go out and sell.

Related: 10 Businesses You Can Start Part-Time

Now, a passionate founder might be able to sell a solution to customers, even if the product/market fit isn’t quite there, but they’ll never have success through traditional sales forces.

How have you seen entrepreneurs — even those who have embraced the process of customer development — go wrong? What are some of the pitfalls and hidden complexities of the process?

The lean start-up methodology consists of just three simple parts. First, articulate your hypotheses. Secondly, get out of the building and test your hypotheses. Lastly, start building minimum viable products (MVPs).

The hardest part of the process for founders is to just get down to business and actually do it. The process isn’t technically difficult, but it can be difficult on an emotional level, because you have to really put your idea to the test.

Also, the fact is, most start-ups fail. Even if you embrace the process, there’s still a high probability of failure. Even if you’re testing, you might find that your initial hypotheses were just wrong. Or you could discover that the idea isn’t scalable. But lean start-up makes entrepreneurship more efficient. Success is never guaranteed. There are simply too many variables involved.

Lean start-up principles have gained a lot of traction in the tech industry, but they can obviously be applied elsewhere.

In a country such as South Africa, where many lack the funds, education and access to technology needed to pursue other avenues, entrepreneurship is often seen as the only path to success.

Could you talk about the role you see lean start-up playing in South Africa?

Lean start-up actually has nothing to do with technology. It’s just a way of testing hypotheses about businesses. SMEs make up the bulk of entrepreneurs, both in the US and places such as South Africa.

They could be a dry cleaner or a database consultant, it really doesn’t matter. And this is a major category where the principles of lean start-up apply.

Related: 8 Musts to Start Your Business With Little to No Capital

You also need to look at the fact that tech-based start-ups are becoming increasingly affordable to launch. The price of starting one has dropped by a factor of a 1 000 over the last few decades. You no longer need $4 million to create a software start-up; you can do it on a laptop.

So lean start-up makes entrepreneurship accessible. You might need money at a later stage to scale, but you can get started without spending anything.

GG van Rooyen is the deputy editor for Entrepreneur Magazine South Africa. Follow him on Twitter.

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Where Should You Begin?

It goes without saying that the right people on your team make all this possible. But this is a topic for another day.

Peter Castleden

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When I first started what was to become IndieFin, I really didn’t know where to begin. I had been granted a tiny bit of funding – enough to last about a year – on the basis that I could figure out how to reinvent financial services for the digital generation.

The initial challenges were plentiful. My experience with technology was exclusively as a user. So, I had close to zero knowledge on how to execute anything that I dreamed up. I also was very aware that the financial services industry had a reputation for offering awful customer experiences, so the bar there was very low. And finally, having spent a good few years working on developing financial products in the industry, I realised the opportunities to improve on the industry’s products were vast.

While this sounds like a fairly ideal situation for an entrepreneur, and while I feel very grateful for the opportunity, the real challenge was that there were simply so many things that could be built, all of which would present radical improvements on the status quo.

First steps

A couple of us sat in a room and started putting ideas down on a white board.  We went wild, and kept coming up with more and more great ideas. In fact, we came up with both a very compelling retail investment proposition, as well as what turned out to be our insurance proposition.

Related: 4 Things Your Start-Up Needs When It Opens An Office

What this exercise revealed, was that ideas alone are pretty useless. And, too many ideas can paralyse you.

Our small team got stuck in that trap, which was made worse because we didn’t (yet) have the skills to bring any of those ideas to life.

Hard lessons

We wasted a good few months (and some money) simply working on the details of multiple ideas. We were generating lots of documentation, and a few pretty pictures, and truly believed we were making progress.

In reality, we were running on the spot. Things changed with the addition of some new talent – who brought with them a completely different approach and complementary skillsets. This combination of people changed how we were doing things, for the better, and we managed to launch something into the market a few months later.

If I could take out the key lessons from this early stage of our business, they are:

  1. Choose one thing to do, and focus all your energy on doing it. This does not mean you throw out the other good ideas… but put them on the “not yet” pile.
  2. If it’s going to take you longer than three months to build and deliver your one thing to the market, it’s still too big. Strip it down to its core, until you can confidently build it and ship it within a quarter. This may feel like you are watering down your idea, and maybe you are. However, working to a longer timeline than this will stall you, with the risk of never getting anything shipped.
  3. Launch what’s ready. You will know what can still be done to make it better. It’s scary to launch something that is nowhere near your mental picture of what it can and will be.  Do it anyway.
  4. Be ready to learn. The best market research you can conduct is with real people using something you’ve built in the real world. Sure, you run the risk of brutal feedback (and perhaps it’s because it was launched early), but the free lessons you learn will be priceless in developing version 1.2 and 1.3 and 1.4.

Related: 3 Dangerous Entrepreneurial Myths You Need To Ignore

Fear is your enemy at this stage of the business. Personally, I needed others to challenge that natural fear, and push “go”. And I’m glad I did. Most of what we built in the early versions of the product releases were not even on our original roadmap. The stuff we have built since launching, and which we are still going to build, have been inspired by our customers and the lessons we have learnt in launching something incomplete.

It goes without saying that the right people on your team make all this possible. But this is a topic for another day.

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Start-up Advice

4 Things Your Start-Up Needs When It Opens An Office

There are certain things you should definitely ensure your office has. If not before you move in, then as soon as you can set it up.  

Jessica Edgson

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So, your start-up is finally up and running. You’ve been dreaming about this moment for as long as you can remember. And now you have clients or customers, a small team of dedicated employees and you’re turning a decent profit. Which means it’s time to move out of your garage and into a proper office.

You don’t want your staff filling up your personal space at home. Your garage, although creatively decorated, simply is no longer big enough. Plus, there simply isn’t enough parking on your street. It’s time you go from a bunch of youngsters with a big idea to a proper business with a premises you’re not afraid to invite clients to.

But, first, you need to choose this office and it’s that’s not a task you should take lightly. Obviously, you want to keep that creative startup vibe you’ve worked so hard to build up, so a space in a corporate office block isn’t going to work for you. You need to choose something that conveys your independent nature and inspiration-led work ethic.

Related: The Unwritten Rules: Real Start-up Advice To Launch A Game-Changing Business

However, there are certain things you should definitely ensure your office has. If not before you move in, then as soon as you can set it up.

At least one boardroom

You and your employees may be all about a “shared space” where everyone knows what everyone else is up to. But, unfortunately, it’s time to face the fact that you’re going to need at least one boardroom in your new office. Why? Because you will now be hosting clients and investors and they will want to discuss their wants, needs and expectations in a quiet place where they can hear themselves think.

Of course, this boardroom doesn’t have to look like it belongs in a big corporate office. You can decorate however you want. If you want to give the appearance of transparency with your staff, so they don’t freak out every time you drag all your senior employees into the room, you can always have glass walls that are easy to see through.

You’ll also want to incorporate some impressive tech into your boardroom to wow your clients and investors. Interactive whiteboards and touchscreen tablets at each seating place will give the appearance that you have, literally, got technology at your fingertips.

Security you can trust

And with all the tech that comes with owning a startup, you’ll want security to protect all your assets. This is not an area where you can afford to skimp on costs and save money.

If you’re in an office park of sorts (the kind that still allows you to keep your creative vibe), there’s probably already a security guard doing the rounds regularly. However, it’s up to you to ensure you can monitor who enters and exits your premises.

A great way to do this is with a fingerprint scanner at your front door or a tag system. Just make sure you take ex-employees off the system as soon as they leave and are able to add new employees just as quickly.

Now you need to focus on internal monitoring. A video wall controller paired with strategically placed cameras around the office is always a good idea. That way if there’s ever an incident, it can be caught in real time and even recorded for later use as evidence.

You’re investing a lot of money in your business assets as well as your space, so it’s important you’re able to protect everything and everyone.

Related: Which Side Hustle Should You Try? (Infographic)

A kitchen with all the necessary appliances

office-kitchen

Yes, you’re going to need somewhere for your employees to make that coffee they need in order to work like the rockstar machines they are. But you’re also going to need a place for them to store their lunch, heat up food and even make food if necessary.

This is especially important if there’s nowhere near your office for them to purchase food. And if you want people to socialise while they eat, make sure your kitchen is big enough for a giant table where everyone can eat together. If that’s not possible, try setting aside space inside the office or even outside the office.

Space for people to move around

As a start-up made up of young people with bright ideas and a collaborative working style, you will likely want to have an open plan office. And that’s great. However, you have to ensure there’s enough space for everyone to move around.

Your team will eventually grow, so you can’t simply create space for the staff you have. You don’t people feeling cramped and uncomfortable.

It’s time for your start-up to move out of your garage and into your own office space. But that doesn’t mean you have to let go of that creative environment you’ve worked so hard to cultivate.

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How To Build The Right Mindset For Start-up Success

When clarity, consistency and execution become your signal characteristics, getting what you want becomes automatic.

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Mindset matters. Whether you’re a founder, CEO, first-day-on-the-job newbie, or bold, would-be entrepreneur, if your mind isn’t right then your decisions aren’t right. And with suboptimal decision making comes suboptimal results. How you show up everyday determines how you tackle the challenges that come your way.

However, oftentimes what gets in the way is ourselves – our thoughts and emotions. If you dislike public speaking, for example, what might go through your mind if asked to present in front of an audience is that little voice in your head saying something like, “I hate speaking. I’m not good at it!” Your heart skips a couple beats, your hands become uncomfortably moist so you pat them on your pants which doesn’t exactly help your self image and then you begin stammering. Congratulations, you’ve just entered the realm of weird.

Don’t let emotion get the better of you. Stay focused on what matters by learning to separate emotion from reason so you can focus on what you need and not be swayed by what you want.

Related: Smart Money For Small Businesses

Here’s how:

Clarify winning

Having the right mindset begins with identifying what you want. Without a clear picture of what winning looks like you’ll never know if you’re on the right path, which means you can’t course correct. Take the time to clarify what “success” looks like to you.

You might want to become more disciplined, improve your focus, or learn to talk to yourself more effectively (yes, self talk is a skill). Clarity creates two things. It creates meaning, and it creates guidance for you to focus on which allows you to better communicate not only with yourself but with your team as well.

It’s easy to take leadership, teamwork or any of those “soft skills” for granted, but without them a company wouldn’t exist. Get clear on what good leadership looks like; what effective teamwork looks like.

When you know what right looks like, you can make immediate adjustments to get back on track even after they’ve gone wrong.

Make consistency a habit

Being great at anything requires two things: Consistency and effort. You have to do the work to be great, and you have to do it consistently. Muscle doesn’t build itself (trust me, I’ve tried). You don’t get stronger by doing some pushups whenever you feel like it. You improve by going to the gym consistently and doing the work to get stronger.

Leading a team or a company requires the same consistency of effort. You get better at communicating by communicating. You get better at focusing by focusing. You get better at working together by working together to get better – and doing so consistently.

Now, while consistency and effort are two critical ingredients to crushing anything in life, so too is learning. After all, you can be as consistent and as diligent as you want, but if you A) don’t have a clear definition of success, discussed above, or B) don’t learn from past mistakes, then you’re only getting to the wrong place faster. Make learning a habit by consistently learning, and you’ll develop the mindset of constant improvement.

Suspend judgment to get stuff done

SEAL training

I remember in first phase of BUD/S (Basic Underwater Demolition/SEAL training) an instructor giving us an example of the type of mindset that every SEAL has – the type of mindset that gets stuff done. He told us that if he had to go run 25 miles right then and there because it was critical to mission success, he would. He would’ve done it not because he liked running or because he was ordered to, but because it was something that just had to be done.

Related: 4 Hacks To Overcome The Struggles Of A Running A Small Biz

The takeaway is that you don’t have to like everything you do. You just have to do it (whatever it happens to be). To really make an impact in your work or in life in general, suspend judgment. When you suspend judgment you forego any emotion attached to that judgment. Then, all you have left is action versus inaction, do or do not do. It’s not easy, but then again nothing good ever is. Do it anyway.

Being right in anything requires clarity, consistency and effort. There’ll be bumps in the road, no doubt, but those bumps are what make you better.

This article was originally posted here on Entrepreneur.com.

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