Steve Blank Podcast
Summary: Steve Blank, eight-time entrepreneur and now a business school professor at Stanford, Columbia and Berkeley, shares his hard-won wisdom as he pioneers entrepreneurship as a management science, combining Customer Development, Business Model Design and Agile Development. The conclusion? Startups are simply not small versions of large companies! Startups are actually temporary organizations designed to search for a scalable and repeatable business model.
We just had our first week of our new national security class Technology, Innovation and Modern War. Given the tech-centricity of Stanford and Silicon Valley, Joe Felter, Raj Shah and I thought it was natural to design a class to examine the new military systems, operational concepts and doctrines that will emerge from 21st century technologies – Space, Cyber, AI & Machine Learning and Autonomy.
I’m teaching my first non-lean start up class in a decade at Stanford next week; Technology, Innovation and Modern War: Keeping America’s Edge in an Era of Great Power Competition. The class is joint listed in Stanford’s International Policy department as well as in the Engineering School, in the department of Management Science and Engineering.
“Let’s do something to help with the pandemic.” In April, with the economy crashing, and the East Coast in lockdown, I heard this from Stanford instructors Tom Bedecarre and Todd Basche, both on the same day. And my response to them was the same, “I can’t sew masks and I don’t know how to make ventilators.” But after thinking about it, it dawned on to me that we could contribute – by creating a class to help existing businesses recover and new ones to start.
Remote education in the pandemic has been hard for everyone. Hard for students having to deal with a variety of remote instructional methods. Hard for parents with K through 12 students at home trying to keep up with remote learning, and hard for instructors trying to master new barely functional tools and technology while trying to keep students engaged gazing at them through Hollywood Squares-style boxes.
The pandemic has upended the business models of most startups and existing companies. As the economy reopens companies are finding that customers may have disappeared or that their spending behavior has changed. Suppliers are going out of business or requiring cash-up-front terms. Accounts receivables are stretching way out. Revenue models and forecasts are no longer valid.
Controlling advanced chip manufacturing in the 21st century may well prove to be like controlling the oil supply in the 20th. The country that controls this manufacturing can throttle the military and economic power of others. The United States just did this to China by limiting Huawei’s ability to outsource its in-house chip designs for manufacture by Taiwan Semiconductor Manufacturing Company (TSMC), a Taiwanese chip foundry. If negotiations fail, China may respond and escalate, via one of many agile strategic responses short of war, perhaps succeeding in coercing the foundry to stop making chips for American companies – turning the tables on the United States
We just finished our 5th annual Hacking for Defense class at Stanford. What a year. At the end of the quarter each of the eight teams give a final “Lessons Learned” presentation. Unlike traditional demo days or Shark Tanks which are, “here’s how smart I am, please give me money,” a Lessons Learned presentation tells the teams’ stories of a 10-week journey of hard-won learning and discovery. For all the teams in a normal year it’s a roller coaster narrative of what happens when you discover that everything you thought you knew on day one was wrong and how they eventually got it right.
The Covid-19 virus is not politically correct. It discriminates against the old and the unhealthy. The biggest risk factor in dying from the virus is age. If you’re 60 to 70 years old, you’re 30 times more likely to die from Covid-19 than if you’re under 40. And if you’re over 80, you’re 180 times more likely. It’s not that the young don’t get sick or die, but the odds are dramatically different.
The world is a different place than it was 90 days ago. Countries traded saving lives by shutting down most of their economy. Tens of millions who had jobs are now unemployed worrying about their future. Business owners large and small are struggling to find their footing, wondering what will be the new normal when the recovery happens. For the majority of companies, the business models of the past will not return.
Over the last month billions of people have been unwilling participants in the largest unintentional social experiment ever run – testing how video conferencing replaced face-to-face communication. While we’ve discovered that in many cases it can, more importantly we’ve discovered that, regardless of bandwidth and video resolution, these apps are missing the cues humans use when they communicate. While we might be spending the same amount of time in meetings, we’re finding we’re less productive, social interactions are less satisfying and distance learning is less effective. And we’re frustrated that we don’t know why. Here’s why video conferencing apps don’t capture the complexity of human interaction.
Sheltering in place during the Covid-19 pandemic, my coffees with current and ex-students (entrepreneurs, as well as employees early in their careers) have gone virtual. Pre-pandemic these coffees were usually about what startup to join or how to find product/market fit. Though in the last month, even through Zoom I could sense they were struggling with a much weightier problem. The common theme in these calls were that many of them were finding this crisis to be an existential wakeup call. “My job feels pretty meaningless in the big picture of what matters. I’m thinking about what happens when I can go back to work. I’m no longer sure my current career path is what I want to do. How do I figure it out?” Here’s what I’ve told them.
With in-person classes canceled, we’re about to start our online versions of Hacking for Defense and Hacking for Oceans (and here). The classes are built on the Lean Startup methodology: Customer Discovery, Agile Engineering and the Business/Mission Model Canvas. So how do our students get out of the building to talk to customers to do Customer Discovery when they can’t get out of the building? How do should startups do it?
This is the one blog post that I hope I’m completely wrong about. With the Covid-19 virus a worldwide pandemic, if you’re leading any startup or small business, you have to be asking yourself, “What’s Plan B? And what’s in my lifeboat?” Here are a few thoughts about operating in uncertainty in a pandemic.
What cashflow-negative companies must do to survive We’re in uncharted territory with the Covid-19 pandemic. But it’s increasingly looking grim. Companies that outlast this crisis will have CEOs who can rapidly assess these new circumstances, recognize new patterns and opportunities, and act with urgency to take immediate action to pivot and restructure their companies. Those that don’t may not survive. So here’s a five-day playbook to help CEOs of cash-flow negative startups, or ones about to go negative, assess the new normal and respond with speed and urgency.
Jeff Epstein is on the board of Shutterstock, Twilio, Kaiser Permanente, and was the CFO of Oracle, DoubleClick, Nielsen and King World and is an operating partner at Bessemer Venture Partners. He teaches the Lean LaunchPad class at Stanford with me. And the minute he talks about financing I shut up and take notes.