How to Fail Less

Tuesday, April 17th, 2012

Derek Thompson interviews Steve Blank on the secrets of start-ups — or how to fail less:

Can you really teach entrepreneurship?

Many people say you can’t. They’re ignorant. But it was true that we didn’t know how to teach entrepreneurship for decades, because we didn’t understand how start-ups were different from large companies.

Large companies execute. Start-ups in their early stage don’t execute. They search. And for a long time, we had no tools for search. But in the last few years, we’ve started to build the equivalent of an execution plan for start-ups. We’ve cracked the code for early stage ventures. We can say that we know how to make start-ups fail less.

Tell me how you teach entrepreneurship. What does it mean to learn how to search?

The old entrepreneurship class was: Let’s write a business plan do a PowerPoint presentation for the investors. But that plan is a static item. It says, “Here’s my idea. Here’s the opportunity. Here’s the team. Here’s the forecast.” It has no learning. I teach at Stanford and Berkley. Let me tell you, the smartest kids in the world can put together a great plan with no bearing on reality.

So I came up with the idea of a “Lean Launchpad.” It’s been picked up by various universities and the US government. The Lean Launchpad says: We don’t care about your initial hypotheses. The hypothesis is just a thought. The safest bets are probably all wrong. Your initial guess about customer and price are going to be wrong. About 950 of the 1000 best start-ups don’t execute their first plan.

The old process — Does you hypothesis seem good? Here’s a grade. — is great for professors because we can grade it. In my class, you test these hypotheses. You talk to 15 customers a day. You’re doing constant iterations. Every once in a while, you come up against the facts just don’t match. That major change is called the pivot.

A pivot sounds terrifying for a team that put months and thousands of hours into executing what they thought was a great idea.

It is scary. But embracing the pivot is neat way to look at things. In the old days, we fired the VP of sales and the VP marketing if the plan didn’t work. Our thinking is, don’t fire the people first. Fire the plan first. Your first start-up ideas are just guesses you pulled out of somewhere. They’re probably wrong. The new way to teach is as hypothesis-testing.

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