Feb 7, 2021
Entrepreneur-turned-educator, Steve Blank is the Father of Modern Entrepreneurship.
Credited with launching the Lean Startup movement, he’s changed how startups are built; how entrepreneurship is taught; how science is commercialized, and how companies and the government innovate.
Steve is the author of The Four Steps to the Epiphany, The Startup Owner’s Manual -- and his May 2013 Harvard Business Review cover story defined the Lean Startup movement.
He teaches at Stanford, Columbia, Berkeley and NYU; and created the National Science Foundation Innovation Corps -- now the standard for science commercialization in the U.S.
His Hacking for Defense class at Stanford is revolutionizing how the U.S. defense and intelligence community can deploy innovation with speed and urgency, and its sister class, Hacking for Diplomacy, is doing the same for foreign affairs challenges managed by the U.S. State Department.
Steve blogs at www.steveblank.com
Social media profiles:
Ula Ojiaku 00:52
So we have Steve Blank, the legend himself. Thank you so much for making the time to join me on the show.
Steve Blank 00:59
I'm excited to talk to you and your listeners. This should be fun.
Ula Ojiaku 01:03
Definitely. I've listened to other podcasts or shows where you said you grew up in a dysfunctional family and growing up in chaos kind of helped shape you into who you are. And there was some sort of silver lining in that cloud. Can you elaborate on that? How did that shape you into the Steve Blank we see and admire today?
Steve Blank 01:22
Sure, you know, my family circumstances, while difficult, aren't unique. I mean, lots of people in the world too wake up and not quite know what's going to go on the next day but I think there's a couple things. One is it makes you focus on survival, and also helps you shut out all the things that are not important for survival. So I grew up not understanding, but actually you did much later in life that when there's chaos around me, I'm able to figure out about what I consider the fog of war, where are we heading, where everybody else is running around, going, Oh, it's confusing, or you know, things are going off around you to kind of go rifle shot in figuring out where the exit is. And it turns out that that's the world's cruelest but most effective training ground for early stage entrepreneur. And that's exactly the physical danger is, it's exactly what a founding CEO encounters the first year to their company. Nothing goes right, everything's unpredictable, things are going on around you yet you need to stay focused on what it is to do and have a bias for action rather than passively sitting around waiting for things to be fixed. And I didn't understand that until I was in a war zone in Southeast Asia during the Vietnam War. Luckily, I was well away from where people were actually shooting at me but in the Air Force, I got to do things that I never would have gotten to do anywhere else in a civilian life at a very early age. And realize that combined with some other skills I had, which probably were only two. But you know, the other one was I was pretty good at pattern recognition. And then three is I was curious about everything way beyond my paygrade. Four is I showed up a lot, which I think is 80% of what a young entrepreneur needs to do, is show up more than most people. And those are the skills that have lasted me the last 40 years.
Ula Ojiaku 03:09
Wow, you've launched about eight companies, and some of them went on to IPO. So how did that quality of showing up help you?
Steve Blank 03:19
Showing up a lot, you know, varied throughout my career. But it was consistently being where other people were out drinking or partying or said it's too hard to do, or Gee, I don't want to volunteer for that. And, you know, in the military, the version was working extra hours to help people just because I was interested in what they were doing. And by accident getting noticed, I mean I wasn't trying to get noticed, but I did. The rule was never volunteer for anything but I volunteered for everything. And half of them really were crummy jobs but the other half were incredibly interesting. My entrepreneurial career, my test of whether you're cut out to work these hours is when I was living in Silicon Valley, I often would call people in New York and just say, oh by the way, I'm going to be having coffee across the street from you tomorrow, do you mind if I drop in and call you? I had no plans to do that but if they said yes, I would jump on a redeye and will literally take a 15 minute meeting, because showing up a lot might have got me an order and multiple times it did. If you're not willing to do those things and put yourself out for the extra effort and believe it's going to come to you, it's okay but don't choose a startup as a job. It takes that extraordinary effort, showing up a lot just doesn't mean cruising across the street or something else. I retired when I was no longer willing to get down that redeye for the 10 minute meeting, it meant I was too old to play that game. Someone else was going to do that, someone I was competing with would have had that passion and energy to do it.
Ula Ojiaku 04:49
Well, that's really impressive. You are an adjunct professor at Stanford University, you're also a guest lecturer at many other notable higher education institutions. The funny thing is that you admit you're a college dropout.
Steve Blank 05:05
I still laugh every time and I want to make the point, I'm not exceptional, I'm the exception. And there's a difference there, you know, I've taught in multiple places and then every place I've been if I had to pick the odds over the group of people who's going to succeed, someone who's dropped out or someone who actually had the discipline of sticking it out four years and even learning what community college or four year college pay odds are much better for people who stay in college. There's a small group of people, maybe not so small, like I was at the time, who just didn't have discipline. I was completely undisciplined, couldn't see the value of why I was there, was doing horribly and was completely out of control and I probably needed reform school at the time. I chose the military as an alternative. I think that's an edge case and it's not that I regretted it but I've spent my life catching up on those missing pieces of my education, both undergrad and grad school, I probably should have went to. Somebody should be thinking about, if you are literally out of control and don't have the discipline, that's probably the reason not to be in college, and you need to gain the maturity and the skills to go back. I wish someone had counselled me to do that and I'm not sure I for a long time had that discipline and maturity to go back. So yeah, I think I'm an exception to a set of heuristics that I think probably say today even more, so if you could stick it out, it is worth staying in.
Ula Ojiaku 06:35
Thanks for that.
Steve Blank 06:37
And by the way for a couple reasons, let me just be clear, one is the education you're going to get. And the second is, regardless of the school you go to, you're going to build up a network of people who because you were in close proximity with them, you will later on in your career, be able to count on or use your network, including your professors and other people.
Ula Ojiaku 06:58
What I hear you saying is, in addition to the education, your networking opportunities could serve you for the rest of your career.
Steve Blank 07:06
Ula Ojiaku 07:07
That's great. So you are the father of the Lean Startup Movement. In my research for this conversation, I learned that it was some sort of massive failure that started you on the path. Is it something you can talk about?
Steve Blank 07:22
Sure. You know, by the time I had done six startups, I was thought of as a successful entrepreneur and attracted a lot of funding for my next startup, which is a video game company, which turned out to be a real mistake for multiple reasons. One is my entire career up till then my customers had been scientists or engineers, or technical people. And what I didn't truly understand is I was now getting into a business where, number one, my customers were going to be 14 year old boys who wanted to kill something. And two is that I was actually not in a business where technology actually mattered at all, it was in fact, maybe a first or even third derivative of what they really cared about; I was in the entertainment business. Well, if somebody would have told me, Steve, you're going to be CEO of an entertainment company, even I would have said don't give this guy any money. But we didn't understand, I didn't understand it, neither did my investors. Make a long story short, I created that company, I was the CEO, I mean, lots of reasons why it went down. And when it failed, I absolutely went through blame my co-founder, blame everybody else, blame my VCs, be angry, go get depressed, and whatever. But after it failed, and back then losing $35 million, was actually considered a lot of money, that was a pretty visible failure. You know, I went through the step of, as I said, anger, depression, whatever, and then acceptance. But then I tried to extract a set of heuristics, a set of rules of what did I learn from not only that, but where did it succeed. And I put those rules together, what came out of that is the beginnings of customer development. And in my next company, Epiphany, which was my last company, the company had an $8 billion market cap, when I went home. We went from zero to $125 billion in three years. That wasn't just me, that was incredible set of co-founders and a CEO we had brought in and 800 other wonderful people, but everything we had learned, or I had learned from that failure just came together and we nailed it in that one. You know, what a definition of failed entrepreneur is?
Ula Ojiaku 09:27
I'm not sure
Steve Blank 09:22
Experienced. It’s a big idea. I failed miserably and publicly yet, in fact, that was quite fundable. Because as long as you're not blaming the failure on everybody else, and you kind of own up to, here are the mistakes I made, and say, well I'm not doing that business again, it turns out that investors were more than willing to write us a cheque. And I think that's unique about places where entrepreneurship is well understood, in other countries or other cultures, when you lose that amount of money for people, they're coming after you or you've ruined your reputation forever. That's not the case in certainly in Silicon Valley, and in London, and other places where entrepreneurship is understood. So that was the beginning of the Lean Startup, using some of the key tenants that epiphany, but still, I didn't have a theory or strategy. It wasn't till I retired, that I actually started writing believe it or not, my memoirs. And I realized 80 pages in that no one really was going to read them, I'd even have to pay my children to read them but there were some lessons learned about success and failure that no one had noticed before. By then I was not only doing my companies but sitting on boards of others, public and private. And that a much broader view of innovation entrepreneurship. The difference between success and failure is whether you just simply built a company around your beliefs and launch the product versus spent a lot of time testing your beliefs, not doing a giant focus group, still staying focused on your vision, but trying to validate or invalidate whether what you were building was correct. And I realized that there was very little literature on innovation entrepreneurship for early stage companies. Back in the turn of the century, there was a ton of literature on how to do innovation inside of large corporations but there was almost no literature on how to do innovation in a garage. And when I went to business school leaders in a variety of universities and pointed this out, I literally got a virtual pat on the head that said, Steve, don't worry your little head, how hard could six people in a garage be? We consult for companies with tens of thousands of people. And then I realized that most business school academics didn't work in startups and therefore, if they consulted, they consulted for major corporations and didn't have the domain expertise of what was unique about early stage ventures. About its funding environment, about its customer environment, about burn rate and things that were critical to understand when your company is starting in your basement versus your company is launching a new product, versus your company that has thousands of people. And those are very different types of innovation entrepreneurship. So the Lean Startup method started with me looking around and going, I think what we're doing is probably not optimal, which is a fancy word for saying, I think we're very wrong, there might be a better way to do this,
Ula Ojiaku 12:22
That nicely goes into the other question that I had for you. You said in one of your books that every startup needs a mission statements and a set of core values, because as you're doing customer discovery, they're going to get conflicting feedback. So there has to be a way of filtering to know the right feedback to follow in developing the products.
Steve Blank 12:47
You know, one of the things if you're a founder is this idea of customer development, getting out of the building, talking to customers, building a minimum viable products, etc., with a giant focus group. So hey, I'll talk to everybody, I'll get some of their features, and they'll build that product. Yeah, maybe but then that kind of makes you a product manager, not really a founder with a vision. You know for me, there's a subtle but important difference is, no, no, I have a vision, I'm the founder, or maybe me and my co-founder have a vision. Let's now go out and validate or invalidate or modify our hypothesis, which is by the way a fancy Stanford word for guesses. But I have put a stake in the ground where I think the world is and where customers will want to buy and let's see if that's correct. Rather than continuing moving the goalposts, if you put the stake in the ground that says, here's our vision, here's the product, here's the customer, here’s the distribution channel, here's the pricing, here's whatever, okay, now instead of launching the product around that, let's go validate or invalidate it as best as we can. Oh, and I'm allowed to, and here's the big idea what changed everything about Lean, and I'm allowed to change before I ship based on what I learned outside the building, that's called a pivot. A pivot is just a substantive change in one or more things you learn about your business model. And the business model is a fancy word for all the things that make an idea, a commercially viable company. That is, you know, who my customers what features do they want, and how much should I charge? How much, what are the costs? Where do I build it, etc. So as I'm learning about this stuff, I might change my vision or modify it, going well, that's great, the product is right, but the people I thought are customers are completely different, or the customers are right, but they only want features three, nine, and fifteen. Hey, I shouldn't waste time on those other things until later, or maybe never. That's what they're getting out of the building is about and that's back to mission and vision. The other thing about mission is once you discover that, then you could share that vision with your entire company. Here's what we're doing, here's why we're doing it, here's what it means, here's our goals. And that should permeate the company from top to bottom. At the same time, as you do mission, you could also be setting culture and culture in a startup is really important. Is it do anything at all costs? Who cares about ethics? You know, I wouldn't recommend that but regardless of what you say, your employees will model their behavior on what you do, not what you say. Or is it like no, we work six days a week that's culture or gee our culture is dancing allowed and free food or no dogs, but free food or no free food or, I mean, these things need to not only be said, but they need to be modeled. So if the CEO says we need to jump on an airplane anywhere, anytime, but he or she doesn't do that then that's a pretty bad model. Or if they say, oh no, we really believe in work life balance, and we want you all out of here at 5:30. That's another model, but the CEO shouldn't be sitting in the building. Does that make sense?
Ula Ojiaku 16:04
Makes a whole lot of sense. Yes.
Steve Blank 16:07
I've been working with large companies and government agencies, and I'm trying to emulate the same process that startups do inside of the corporations and governments. And is that the issue in large organizations are not whether you have people as smart as you have in startups, and just note to large corporation and government, you have smarter people there, you have more of them. What's different is the nature of the corporation. What I mean by that is, a corporation or government agency is designed for scale. And when you design for scale, you put in place processes and procedures and metrics and OKRs, and KPIs to measure performance. And therefore, people believe that these are the walls and rules and kind of guidelines that you operate in. And it kind of, that's great actually for scale, that's how larger organizations stay in sync and on scale, and it works wonderfully, when there's a repeatable environment that is operating it. But in fact, when chaos starts happening outside, when you're being disrupted by either competitors in commercial companies, or by adversaries in the government, or, gee you're no longer part of the EU, all of a sudden,
Ula Ojiaku 17:24
Not quite yet there
Steve Blank 17:25
But all of a sudden, the world has changed. But those processes and procedures you put in place, were for a steady state repeatable environment. And therefore, you now need to inject some new innovation. But if you look at your rule book and Handbook, there is no rules for innovation entrepreneurship and in fact, that usually conflicts with all those processes that is your supply chain, you know, isn't “No, you can’t order something from Amazon we have you know these contracts…”, or “no you can't just jump on an airplane, you need the approval of four supervisors to go do this…”. “No, you can't start this new division, you need to take the most, you know, senior people…”, why, but those are the last people I want in an innovation group. All these things, by the way, are real things I've run into,
Ula Ojiaku 18:09
I have experienced them as well.
Steve Blank 18:12
So in fact, what you really needed in a government and in corporations is an innovation doctrine and doctrine is kind of like, what are the meta rules for how we deal with innovation, it shouldn't just be, oh, I have a corporate accelerator incubator, isn't that great? Because what that really means is I have innovation theater, I really haven't figured out how to integrate all this stuff from leadership to an innovation pipeline, or a process that runs in parallel. And the mistake people make in the first pass of doing this, is thinking that you're going to turn everybody in your large organization into an entrepreneur and I have found that that's just a fatal error. Not everybody comes to work to be an entrepreneur, the fact that you have some great entrepreneurs in your organization is a key idea but that's not what the rest of your organization sign up for. So the question is, is how do you get a larger organization to both chew gum and walk at the same time, it needs to be ambidextrous. And this is again, a concept from 20th century. Tishman and O'Reilly, two professors, one from Stanford and MIT talked about this for decades, when it was a nice to have in the 20th century. I'll contend that being ambidextrous and having an innovation doctrine is essential for survival in the 21st century, whether it's a company or government, and I think we see lots of companies and governments trying to struggle with how to kind of move into this, I no longer need to do one thing, but I need to do two things at a time. I need to execute and I need to innovate in parallel. That's hard.
Ula Ojiaku 19:53
Yeah, sure. And that kind of also brings in to mind the three horizons as proposed by McKinsey. You said that you have the horizon one, where you have your cash cow stable, and then you're also looking into the future and making sure to also invest in things that could be the next big thing. And I guess going back to your reference to ambidextrous organizations, that would be a key capability that will be required in an organization to be able to realize that, what do you think?
Steve Blank 20:23
Well, you know, I think again it starts with leadership and by leadership, the board of directors or managing board, not just the CEO, need to pick up and say, wait a minute, is it business as usual or do we need some change? And if you don't realize that the world around you has changed and that you're being put out of business, that is if you're in a retail business selling clothes or something else, you wake up and you discovered Amazon is taking your business. Or if you're in the government, and you realize gee, you know, the world is no longer with facing one adversary or facing multiple adversaries or gee Healthcare changed or something else, it needs to start from there. Because if there is no impetus for change, the status quo will continue until it's too late. And as I said, creative destruction is kind of okay for corporations, it's not okay for government agencies where the country has a kind of, has an obligation to its citizens to be ahead of the game not behind it. And once but let's say in a positive sense, you realize that change, the biggest thing that companies fail to do is communicate it coherently and repeatedly to the rest of the organization; is here's what we need to do to still stay in business. And it's not that everybody needs to panic and scurry around but here's how we need to organize for continuing our core business as we transition into either new businesses or new ways of doing business. And as you said, one of the tactics is realizing that there are three horizons of innovation, one is just making our existing product line or services better, horizon one, or expanding to adjacent spaces, or different distribution channels with different customers with the same products or technology, horizon two. Or creating new things that just didn't exist before. That is one tool that, you know, leadership can kind of use in a large organization, at least in a corporate world, you could acquire, you could partner, you could buy. In a startup, you know, all you have are your own resources but corporations actually have a lot more moves than startups in thinking about innovation. When they first realize at the leadership level that things have changed. But you also need to build these parallel processes of, you know, okay well, how's HR going to deal with innovation and execution, it can't be the same rules. The real test is, if in a large company or government agency, you have the same exact rules and processes and procedures for execution, as you do for innovation, then you don't really have a company or organization that's going to survive. There needs to be parallel processes and in fact, the other thing you need is an innovation end to end process, not just I have an incubator accelerator and look at our great demos. But what's the end to end process from sourcing ideas and people and technology and problems, all the way to delivery or deployment of those services outside the building? Very few organizations have that kind of as a full function continuous innovation process but that's what's required.
Ula Ojiaku 23:23
Right. So with respect to that though, you're saying there has to be, you have to have parallel processes in place so there is innovation going on. However, the business as usual, or keeping the lights on, like HR or finance, how they tie into it needs to also be thought through. Would you then say that all these details need to be worked out before an organization tries to create some innovation? Or is this something that could be worked out, whilst doing it?
Steve Blank 24:03
So in a perfect world, it would start with from the top, from a board of directors, the sea level conversation that acknowledges that status quo is taking you off the cliff. And by off the cliff, meaning sales are going to decline or government services are going to be less effective, or the country is going to be less competitive if we continue this way. That's the first discussion in a perfect world. What really happens though, is today, there's a sea of unhappy entrepreneurs sitting inside your company or government organization who already exist, beating their head against the wall. In fact, the symptom of this it's been going on for decades, is that we always hear stories about what I call heroic innovation. That is we celebrate these people who actually have fought against the system and get something done and we give them awards. Instead of saying, well wait a minute, these people are symptoms of a broken process, and actually don't have any process for them to; it shouldn't have required heroics to do this. Kind of like, it was the same light bulb that went on when I wrote the first book about what became lean in four steps to epiphany. The light bulb is why are we celebrating heroics, instead of being embarrassed that the system is broken? And so in every organization, this is what I meant when I said there are more entrepreneurs and innovators inside larger organizations than there are startups. Startups though are organized to capture their energy and their passion and their innovation. Corporations and government organizations are organized to actually beat it out of them. Again, not because of malice or bad or people being stupid, it's just that the big lightbulb hasn't gone on that says no, we need different processes, we need an end to end, that is we don't even have that language inside of a corporation, other than trying to steal and by steal I mean, in a nice sense, all the processes from a startups, which really don't map into companies and government agencies because they have different goals, different missions, different incentives. We can take the ethos of a startup and put it inside of companies and government organizations, and we could harness that same passion but we need very different processes and procedures than those that startups use.
Ula Ojiaku 26:23
Very true. I'll just move on to the final part of this conversation. Following your work, reading, you know, your blogs and listening to some of your conversations on other media platforms, you sound to me like you're a lifelong learner. So is there any book that you found yourself gifting the most to people? And if so, what's that book and why?
Steve Blank 26:51
Well, on the business side, Alexander Osterwalder's Business Model Generation book was a real eye opener for me. You know, my work, as part of lean, lean has three parts; customer development, agile engineering, and the business model canvas. And it really took the three of us, my work was the customer development process, Eric Ries, who wrote a great book called The Lean Startup was the one who observed agile engineering was a great partner to that. But Osterwalder’s work on the business model canvas gave us kind of a scorecard and he originally intended it as a static diagram. And I realized it was actually much more useful as one that was dynamic and got updated over time. So those three books, My Four Steps to Epiphany, Ries’s Lean Startup Guide, and Osterwalder's Business Model Generation should be kind of the three texts that sit on an entrepreneur shelf, to kind of understand the basics. There's some other later reading, I mean, there are hundreds of books; Marc Gruber wrote a book called Where To Play: 3 Steps For Discovering Your Most Valuable Opportunities, I now kind of think of as the front end of the process. But I should just point out it would be kind of ironic, if I didn't, is that entrepreneurship is not a reading the book activity, it's an experiential activity. So you can't read the book and then say, I now know or watch the videos or you know, have videos on Udacity and other places. It really is read the book in context with actually getting your hands dirty and by getting your hands dirty, I mean, build something, test it, get out of the building, etc. Even if it's something small, that's as important as it is understanding the theory. The theory might give you a light bulb, you know, like oh, this is where I should be spending some time. But getting out and getting your teeth kicked is probably the best confirmation. Then you go, Oh, I miss page 47 where it said, this is what will happen. So that's my advice for both reading and doing.
Ula Ojiaku 28:52
Great. Thank you. And we will have the books you've mentioned in the show notes as well as links to them so thanks for that. So to wrap up, you've already given us some good advice in terms of not just read the book, go out there, and get your hands dirty, get something built, get it tested, get it validated. Would there be any other advice you'd have for upcoming entrepreneurs? (last word not clear)
Steve Blank 29:21
This one's kind of interesting is that, you know, nowadays entrepreneurship, starting a company is kind of cool. It's like your friends are doing it, you're doing it and people tend to think, gee a startup is a job and I think that's the world's worst mistake. Startup isn't a job, at least now I'm talking about being a founder, or co-founder and startup is not a job; it's a calling, right. There are great jobs out there but being a founder is closer to being an artist than any other profession. If you're not called, if there isn't an itch, you need to scratch, if there isn't something you need to get out of your system, then you might be in the wrong profession. Because a job says hey, you show up every day and you get paid, in a startup you show up every day, and I hate to tell your listeners the bad news is, the answer you're going to fail. Much like a painter, every painting or sculpture or play or music you write, or play you write is not a success, most of them are crummy, and you just kind of missed it. And you get up and feel bad and then you do another one because you're driven to do that. That's what a true founder is, and it doesn't mean you can't work in a startup. I wasn't prepared to do that my first three or four times in a startup, I'm the spear carrier in the back of this play, meaning I, you know, where you see the opera and there are people in the back. Those are the people who are kind of part of the stage but really not in the front. That was me learning by apprenticeship because I really didn't have that, I have the DNA, but I didn't have the skillset to understand what it was. Nowadays, you could learn much more rapidly than I could have in the 20th century. But still, you need to be driven by, I can't imagine doing anything else with my life or my time. This ain't a job, you could join a startup as a job but if you want to be a founder, you really ought to think about this is how you want to live your life. Yeah, it's with lots of ups and downs and hills and valleys but you have to have passion and drive and vision and curiosity that besides agility, and ambition to make it happen.
Ula Ojiaku 31:35
Wow. Thank you very much, Steve, that's inspiring. One last thing before we go, where can the audience find you, are you on social media? What’s the first place to go?
Steve Blank 31:46
The first place to go is my website, steveblank.com. There's more information for entrepreneurs than ever existed in Silicon Valley in the 20th century packed into one. There's a tabs on top, books to read, Secret History of Silicon Valley, some other things. I'm on Twitter at @sgblank, @sgblank. There's also a series of presentations, slide final decks from all my students on slideshare.net @sblank. And you will find over 600 presentations of my students summaries actually going through my classes. So hopefully to all your listeners have a great time being an entrepreneur. It's the world's worst job, but great call. Take care.
Ula Ojiaku 32:35
And you too. Thank you so much. Thanks.
Steve Blank 32:38
Ula Ojiaku 32:39