Learning to Go Big on Day One at Founder Labs

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This guest post is from Sally Grisedale about Customer Development for the Lean Startup - Notes from Alexander Osterwalder, Steve Blank, Cindy Alvarez and Hiten Shah speaking to Women 2.0 Founder Labs participants on January 23, 2011 In week two of Women 2.0 Founder Labs, the stars of the startup business world kept appearing to shine on us. This week we heard from Alexander Osterwalder the author of “Business Model Creation”; Cindy Alvarez and Hiten Shah from KISS Metrics on marketing strategies for startups and Steve Blank author of Four Steps to the Epiphany, discussing what makes Silicon Valley scalable startups so different from traditional business models. Business Model Creation

In a two hour Skype call from his home in Switzerland, Alexander Osterwalder generously shared the principles in his book “Business Model Creation” and gave us guidance on how to apply them to our emerging businesses.

Any business can be modeled from its 9 components on a “Canvas”. The process that is fast (about an hour), dynamic and inclusive. The approach has become an international language to do business by and is a far cry from the lone MBA polishing his business plan in excel.

Alexanders advice included: Do not to fall in love with your first business model. Stay open to exploring many different alternatives by using the Canvas to model alternatives, for example, trying a revenue stream that is free or one that is paid. Prototyping a business this way enables you to explore alternative possibilities before committing to a good strong competitive model that can be tested.

By focussing on “all” the parts of the business equation, not just the product, entrepreneurs become systematic in the way they build a company, reducing the risks whilst increasing the understanding by testing they underlying hypothesize through customer development. Is there an app for that? Yes, a business model generation from Alexander and his team is coming soon to iPhone.

Lean Marketing for Startups

We heard from KISS Metrics’ Cindy Alvarez and Hiten Shah who know a thing or two about driving traffic to new products. Their advice included: At the early startup stage you are not marketing a service, you are trying to illicit what people need and mirror it back to them. You have a hypothesis so you want to convince prospective clients into talking to you. The approach is to find out, by asking open ended questions, what is the thing that is causing them pain and then decide what you want to do with it.

The duo were full of generous, practical and immediately useable insights. This was user research done in a refreshingly fast, abundant way. Next week we take this learning and hit the streets with our interviews, surveys and new marketing materials. To learn more about my journey, please visit my blog.

What makes the Startup World in Silicon Valley so unique?

Steve Blank is author of Four Steps to the Epiphany, on building early stage companies. The book is at the center of his curriculum for teaching entrepreneurship to students at UC Berkeley, Stanford University and the Columbia University/Berkeley Joint Executive MBA program.

Silicon Valleys, with its combination of young hills, rich soil and flowing bay, brilliantly supports one industry: technology ventures and right behind it, VC, or as it used to be called “Adventure Capital”. Steve suggests that a startup company from Silicon Valley is not like a startup company anywhere else. Why is this?

Firstly, the people plan to go huge from day one. Second, the company is a temporary organization designed to search for a repeatable and scalable business model and third, a scalable startup it is not a small version of an established company. Established conventions for hiring, product development, sales and marketing simply don’t map from an established company to a startup, they are different.

For example, a business plan is good when you are doing the next generation of a product at an established company. A business plan is no help if you don’t know what the first year of sales will be or who the customer is yet. Until Steve read Alexander's book, he had not seen another way to track and test a business hypothesis in real time.

The work of Steve Blank, Alexander Osterwalder, Cindy Alvarez, Hiten Shah, Women 2.0, Y Combinator and Eric Ries, to name just a few, are growing that stack of new knowledge on how to systematically build a scalable start up company. Steve predicts that in 20 years we will be having E schools along with B schools. Through this community, a foundation for learning for the future is taking shape. This can only be good for how we all learn to build viable sustainable businesses from the ground up in the future.

Truly it is a privilege to be a participant in the extraordinary learning process provided by Women 2.0. I am grateful to them and to those brave entrepreneurs who have gone before us to show us the way.