Small Business vs. Scalable Startup

Steve Blank, the creator of the customer development method that launched the Lean Startup Movement, emphasizes that startups are not simply smaller versions of large companies. They are fundamentally different and require their own set of processes and tools to succeed. Customer development, according to Steve, involves learning about customers and their problems as early as possible in the development process.

Steve mentions that he got involved in startups out of curiosity and a desire to explore better ways to build them. He also clarifies that the term "startup" can be confusing and shares a story about lifestyle entrepreneurs who put up a sign offering surfing lessons to support their passion for surfing. These lifestyle entrepreneurs are similar to those who open restaurants or provide marketing consulting services.

In the United States, the majority of businesses (98% to 99%) are small businesses. Such businesses do not usually receive risk capital like angel or venture capital because their returns are not comparable to those of scalable startups. Unlike large companies that have a good understanding of their customers, competitors, pricing, and features, startups are focused on finding product-market fit.

"My definition of a startup is a temporary organization designed to search for a repeatable and scalable business model. There's no such thing as an eight year old startup - there's a two year old startup with a six year old failure attached to it."

Disruption & Innovation Theater

In the 20th century, large companies did not worry about startups as they could not raise significant amounts of money, and the industry was stable. However, the world has become more disruptive, and some startups now raise more money than large companies allocate for research and development. In response, large companies have tried to adopt lean methods to become more innovative. However, Steve believes that this often results in innovation theater rather than genuine innovation. He questions the effectiveness of innovation groups within large companies, asking how many innovative ideas actually reach customers' hands.

Steve argues that large companies' processes, procedures, OKRs, and metrics tend to stifle innovation rather than nurture it. He believes that standing up an accelerator is much easier than fostering genuine innovation within a large company.

"Large companies have processes and procedures and OKRs, metrics, etc., that tend to strangle innovation in its crib."

Customer Development

When asked about principles that remain relevant from the Lean Startup Movement, Steve highlights the importance of testing assumptions. Startups are built on a set of assumptions, and unless these assumptions are tested, entrepreneurs will only find out later, after investing time and money in hiring and building, that they were wrong. Steve stresses the need to go outside the building and interact with potential customers because there are no facts inside the building.

Steve also mentions the concept of customer development, which recognizes that the collective intelligence of potential customers is likely to be greater than that of any individual startup founder. Startups should test hypotheses and show customers incremental versions of their products using agile engineering, enabling them to search for product-market fit. Additionally, he references the business model canvas by Alexander Osterwalder as another important component of the Lean Startup Movement. The canvas helps answer key questions about customers, the product, software or hardware used, distribution channels, customer acquisition, revenue generation, strategic activities, required resources, and costs.

‍

Pivot

Steve explains that one of the advantages of the Lean Startup Movement is the ability to pivot, allowing entrepreneurs to make changes to the business model canvas. This flexibility gives them permission to adjust their target customers or product features based on the results of hypothesis testing. The concept of pivoting and iterating on a minimal viable product was not widely recognized before the Lean Startup Movement. Steve expresses his satisfaction and pride in uncovering this fundamental truth about startups.