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Tools</a></li> <li class="page_item page-item-62"><a href="https://steveblank.com/secret-history/">Secret History</a></li> <li class="page_item page-item-68"><a href="https://steveblank.com/books-for-startups/">Books for Startups</a></li> <li class="page_item page-item-11025"><a href="https://steveblank.com/slides/">Slides/Videos</a></li> <li class="page_item page-item-25609"><a href="https://steveblank.com/raising-money/">Raising Money</a></li> </ul> </li> </ul> </div>  <div class="narrowcolumnwrapper"><div class="narrowcolumn"> <div id="content" class="content"> <div class="post-18505 post type-post status-publish format-standard hentry category-customer-development category-science-and-industrial-policy" id="post-18505"> <h2><a href="https://steveblank.com/2015/03/31/hacking-for-defense-in-silicon-valley/" rel="bookmark">Hacking For Defense In Silicon Valley</a></h2> <div class="postinfo"> Posted on <span class="postdate">March 31, 2015</span> by steve blank </div> <div class="entry"> <p style="text-align:center;"><em>Lead, follow or get the heck out of the way</em></p> <p>In peacetime the U.S. military is an immovable and inflexible bureaucracy. In wartime it can adapt and adopt organizational change with startling speed.</p> <p><a href="http://bmntpartners.com" target="_blank" rel="noopener">BMNT</a>, a new Silicon Valley company, is combining the Lean Methods it learned in combat with the technology expertise and speed of startups.</p> <p>—–</p> <p>But first some history…</p> <p><strong>World War II<br /> </strong>In World War II the U.S. government reengineered its approach to building weapons. In a major break from the past, where the military designed all its own weapons, 10,000 scientists and engineers from academia worked in <em>civilian-run</em> weapons labs (most headquartered in universities) in an organization called the <a href="http://en.wikipedia.org/wiki/Office_of_Scientific_Research_and_Development" target="_blank" rel="noopener">Office of Scientific Research and Development</a> (OSRD).</p> <p><a href="http://www.archives.gov/research/guide-fed-records/groups/227.html#227.1" target="_blank" rel="noopener">OSRD</a> was tasked to <a href="http://www.amazon.com/Scientists-against-James-Phinney-Baxter/dp/0262520125/" target="_blank" rel="noopener">develop military weapons systems and solve military problems</a> but had wide autonomy to determine how to accomplish its tasks and organize its labs. (The weapons were then manufactured in volume by <a href="http://www.loc.gov/rr/scitech/trs/osrdcontractors.pdf" target="_blank" rel="noopener">U.S. corporations</a>.)</p> <p><a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osrd.jpg?ssl=1"><img data-recalc-dims="1" fetchpriority="high" decoding="async" data-attachment-id="18552" data-permalink="https://steveblank.com/2015/03/31/hacking-for-defense-in-silicon-valley/osrd-2/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osrd.jpg?fit=567%2C454&ssl=1" data-orig-size="567,454" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="OSRD" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osrd.jpg?fit=300%2C240&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osrd.jpg?fit=468%2C375&ssl=1" class=" size-large wp-image-18552 aligncenter" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osrd.jpg?resize=468%2C375&ssl=1" alt="OSRD" width="468" height="375" /></a></p> <p>The <a href="http://www.archives.gov/research/guide-fed-records/groups/227.html#227.1">OSRD</a> developed advanced electronics: <a href="http://www.vectorsite.net/ttwiz_03.html" target="_blank" rel="noopener">radar</a>, <a href="http://steveblank.com/secret-history/">electronic warfare</a>, <a href="http://calteches.library.caltech.edu/3672/1/Snyder.pdf" target="_blank" rel="noopener">rockets</a>, <a href="http://oasis.lib.harvard.edu/oasis/deliver/~hua15001" target="_blank" rel="noopener">sonar</a>, <a href="http://www.enginesofinnovation.com/html/proximity_fuse_case_study.HTM" target="_blank" rel="noopener">proximity fuse</a>, <a href="http://www.globalsecurity.org/military/systems/munitions/napalm.htm" target="_blank" rel="noopener">Napalm</a>, the Bazooka and new drugs such as <a href="http://www.lib.niu.edu/2001/iht810139.html" target="_blank" rel="noopener">penicillin</a> and cures for malaria. One OSRD project – the <a href="http://nuclearweaponarchive.org/Usa/Med/Med.html" target="_blank" rel="noopener">Manhattan Project</a> – the development of the atomic bomb – was so secret and important that it was spun off as a separate program. The University of California managed research and development of the bomb design at <a href="http://www.atomicarchive.com/History/mp/p4s25.shtml" target="_blank" rel="noopener">Los Alamos</a> while the US Army managed the Los Alamos facilities and the overall <a href="http://www.atomicarchive.com/History/mp/p3s2.shtml" target="_blank" rel="noopener">administration of the project</a>.</p> <p>After the war the U.S. split up the functions of the OSRD. Nuclear weapons went to the new <a href="http://energy.gov/sites/prod/files/AEC%20History.pdf" target="_blank" rel="noopener">Atomic Energy Commission</a> (AEC), basic weapons systems research went to the Department of Defense (DOD) and all U.S. biomedical and health research went back to the <a href="http://www.nih.gov" target="_blank" rel="noopener">National Institutes of Health</a> (NIH). In 1950, government support of <em>basic</em> science research in U.S. universities became the charter of the <a href="http://www.nsf.gov/about/history/overview-50.jsp" target="_blank" rel="noopener">National Science Foundation</a> (NSF). Each of these independent research organizations would support a mix of basic and applied research.</p> <p><strong>The Cold War<br /> </strong>During <a href="http://en.wikipedia.org/wiki/Cold_War" target="_blank" rel="noopener">the Cold War</a> the U.S. and the Soviet Union faced off with a nuclear deterrence policy called <a href="http://en.wikipedia.org/wiki/Mutual_assured_destruction" target="_blank" rel="noopener">mutually assured destruction</a> (aptly named MAD.) But to fight a conventional war in Europe, Soviet forces had built a 3 to 1 advantage in tanks, artillery, armored personnel carriers, and soldiers. In response the U.S. developed a new strategy in the late 1970’s to counter the <a href="http://www.shsu.edu/~his_ncp/WarPact.html" target="_blank" rel="noopener">Warsaw Pact</a>. Instead of matching the U.S.S.R. tank for tank or solider to solider, the U.S. saw that it could change the game and take advantage of a lead we had that was getting longer every day – using<em> our computer and chip technology to aggressively build a new generation of weapons that the Soviet Union could not</em>.<em> </em></p> <p>At the heart of this <em>“offset strategy” </em>was “precision strike,” – building <a href="http://science.howstuffworks.com/question69.htm" target="_blank" rel="noopener">stealth aircraft</a> to deliver <a href="http://en.wikipedia.org/wiki/Precision-guided_munition" target="_blank" rel="noopener">precision guided munitions</a> unseen by enemy radar, and designing intelligence and reconnaissance systems that would target for them. The offset strategy was <em>smart weapons, smart sensors, and stealth</em> using silicon chips, electronics and computers that only the U.S. could design and produce.</p> <p>By the mid-1980’s the Soviet military was struggling to keep up with this “<a href="http://en.wikipedia.org/wiki/Revolution_in_Military_Affairs" target="_blank" rel="noopener">revolution in military affairs</a>. The announcement of the <a href="http://en.wikipedia.org/wiki/Strategic_Defense_Initiative" target="_blank" rel="noopener">Strategic Defense Initiative</a> (Star Wars) further destabilized the Soviet Union.</p> <p><strong>The Gulf Wars<br /> </strong>When I first started teaching customer development (searching, validating and executing a business model), one of my students pointed out that customer development was similar to the theory of a military strategist, <a href="http://en.wikipedia.org/wiki/John_Boyd_(military_strategist)" target="_blank" rel="noopener">John Boyd</a>. In the 1960’s, Boyd, who was a fighter pilot, proposed that instead of executing a fixed plan, wars would be won by those who can <a href="http://en.wikipedia.org/wiki/OODA_loop" target="_blank" rel="noopener"><em>Observe, Orient, Decide and Act </em></a>(the OODA Loop.) After being ignored for decades, Boyd’s OODA Loop drove the U.S. war fighting strategy in both Gulf Wars. The OODA Loop was the Lean Startup philosophy before lean.</p> <p><a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/large-ooda-loop.png?ssl=1"><img data-recalc-dims="1" decoding="async" data-attachment-id="18554" data-permalink="https://steveblank.com/2015/03/31/hacking-for-defense-in-silicon-valley/large-ooda-loop/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/large-ooda-loop.png?fit=2000%2C818&ssl=1" data-orig-size="2000,818" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="Large ooda loop" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/large-ooda-loop.png?fit=300%2C123&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/large-ooda-loop.png?fit=468%2C191&ssl=1" class=" size-large wp-image-18554 aligncenter" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/large-ooda-loop.png?resize=468%2C191&ssl=1" alt="Large ooda loop" width="468" height="191" /></a></p> <p><strong>Iraq, Afghanistan and the Army’s </strong><strong>Rapid Equipping Force </strong>(REF)<br /> In Afghanistan in 2002 U.S. soldiers were tasked to clear caves that the Taliban used to store equipment. Many of the caves still had Taliban fighters inside while others had been booby-trapped. To clear the caves soldiers threw grappling hooks inside then pulled the hooks out to catch trip-wires and explode bombs. But often this technique did not work and soldiers died. The Army realized they needed to do something more effective. They gave the problem to Colonel Bruce Jette, and 90 days and $750,000 later he had bypassed the existing Army acquisition system and bought existing robots from companies. <a href="http://www.exponent.com" target="_blank" rel="noopener">Exponent</a> provided the <a href="http://www.irobot.com/For-Defense-and-Security/Robots/510-PackBot.aspx" target="_blank" rel="noopener">PackBot</a> and the <a href="http://www.exponent.com/files/Uploads/Documents/TechDev/Exponent_IQT%20Quarterly_Summer%202011.pdf" target="_blank" rel="noopener">Marcbot</a> and deployed them to the field.</p> <p>From that day the Army’s <a href="http://www.ref.army.mil/refhistory.html" target="_blank" rel="noopener">Rapid Equipping Force</a> (REF) was born.</p> <p>The REF’s goal is to deliver technology solutions to front-line soldiers in days and weeks, instead of months and years either by using solutions from previous REF efforts or existing government- or commercial-off-the-shelf technologies purchased with a government credit card.</p> <p>The REF had permission to shortcut the detailed 100+ page requirements documents used by the defense acquisition process. It developed a ten-line short form that listed the most important parts of the requirement. The REF also had its own budget, which it could use to acquire equipment.</p> <p>Soon the REF was sending teams of civilian and military subject matter experts out into the field to discover what they needed. REF expanded its operations to include forward teams in Kuwait and Iraq to provide technology to fill capability gaps and to counter the highest priority threats.</p> <p>By the end of 2007, the REF had <a href="http://www.tradoc.army.mil/tpubs/pams/tp525-8-1.pdf">delivered more than 550 types of equipment</a> and more than 75,000 individual items. The average time from receiving a request from the field to delivering a solution to the soldiers was 111 days.</p> <p>In 2010 <a href="http://lexingtoninstitute.org/farewell-to-one-of-the-armys-best/" target="_blank" rel="noopener">Colonel Peter Newell took over the REF</a> and turned its focus into what we would call a Lean Startup. <a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/pete-newell1.jpg?ssl=1"><img data-recalc-dims="1" decoding="async" data-attachment-id="18514" data-permalink="https://steveblank.com/2015/03/31/hacking-for-defense-in-silicon-valley/pete-newell/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/pete-newell1.jpg?fit=427%2C312&ssl=1" data-orig-size="427,312" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="Pete Newell" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/pete-newell1.jpg?fit=300%2C219&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/pete-newell1.jpg?fit=427%2C312&ssl=1" class="alignright size-medium wp-image-18514" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/pete-newell1.jpg?resize=300%2C219&ssl=1" alt="Pete Newell" width="300" height="219" /></a><br /> Newell insisted that REF started with a deep understanding of soldiers’ problems  before purchasing a proposed solution. Newell found that four problems accounted for two-thirds of REF requirements:</p> <ol> <li>defeating roadside bombs</li> <li>supporting soldiers on foot with communications and load carrying devices</li> <li>providing soldiers with timely intelligence, surveillance, and reconnaissance in combat</li> <li>supplying and protecting small isolated combat outposts</li> </ol> <p>He came up with his version of the OODA loop to explain to people how REF should behave.</p> <p><a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/ref-problem-solving-cycle.jpg?ssl=1"><img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="18575" data-permalink="https://steveblank.com/2015/03/31/hacking-for-defense-in-silicon-valley/ref-problem-solving-cycle/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/ref-problem-solving-cycle.jpg?fit=1466%2C791&ssl=1" data-orig-size="1466,791" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="REF Problem Solving Cycle" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/ref-problem-solving-cycle.jpg?fit=300%2C162&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/ref-problem-solving-cycle.jpg?fit=468%2C253&ssl=1" class="aligncenter size-large wp-image-18575" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/ref-problem-solving-cycle.jpg?resize=468%2C253&ssl=1" alt="REF Problem Solving Cycle" width="468" height="253" /></a></p> <p>To get closer to his customers, Newell commissioned three mobile laboratories that were airlifted to forward operating bases. These labs included a Computer Numerical Control milling machine and 3-D printers for rapid prototyping.<img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="18511" data-permalink="https://steveblank.com/2015/03/31/hacking-for-defense-in-silicon-valley/ref-mobile-lab/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/ref-mobile-lab1.jpg?fit=500%2C333&ssl=1" data-orig-size="500,333" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="REF Mobile Lab" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/ref-mobile-lab1.jpg?fit=300%2C200&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/ref-mobile-lab1.jpg?fit=468%2C312&ssl=1" class="aligncenter size-large wp-image-18511" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/ref-mobile-lab1.jpg?resize=468%2C312&ssl=1" alt="REF Mobile Lab" width="468" height="312" /></p> <p><strong>Hacking For Defense (H4D)<br /> </strong>When Colonel Peter Newell left the Army, he came to Silicon Valley at the urging of a friend and fellow retired Army Colonel, <a href="http://fsi.stanford.edu/people/joseph_felter" target="_blank" rel="noopener">Joe Felter</a>, a Stanford PhD who moved to Palo Alto and Stanford after a career in the Special Forces. Newell accepted Felter’s invitation to join a company he had originally established. <a href="http://bmntpartners.com" target="_blank" rel="noopener">BMNT</a> does for the Department of Energy, the Department of Defense and the Intelligence Community what the REF did for the U.S. Army – build teams that deliver solutions to complex problems, with access to the entire network of suppliers and partners that Newell and Felter developed throughout their careers.</p> <p>To tap into the innovation of Silicon Valley, <a href="http://bmntpartners.com" target="_blank" rel="noopener">BMNT</a>, in collaboration with <a href="http://cisac.fsi.stanford.edu/research/preventive_defense_project" target="_blank" rel="noopener">Stanford’s Preventive Defense Project</a> organized <em>Hacking For Defense (H4D) </em>– a series of hackathons – to help the Department of Defense do four things:</p> <ol> <li>Identify new ideas that will solve problems the military expects to see in the future</li> <li>Map those ideas to the technology that could be used to solve them</li> <li>Recruit the people who can make it happen</li> <li>Show the DoD how to engage Silicon Valley with challenging problems and build networks of people to solve them</li> </ol> <p><a href="http://bmntpartners.com" target="_blank" rel="noopener">BMNT</a>‘s first hackathon, “Hacking the Supply Chain,” brought together diverse teams of technologists and users to provide solutions to the questions: How do you supply troops which can be sent on short-notice, for long periods to places where there are no existing bases or supplies? How might we create the most resilient and efficient supply chain possible for our forward-deployed land forces in 2025?</p> <p>“Hacking the Supply Chain” is focused on:</p> <ul> <li>energy and power generation</li> <li>potable water and field expedient sewage systems</li> <li>advanced manufacturing and repair maintenance technologies</li> <li>training and readiness technologies</li> <li>command, control, computers, and communications technologies</li> </ul> <div> <p>In mid-April, the ideas generated at <a href="http://bmntpartners.com/" target="_blank" rel="noopener">BMNT</a>‘s first hackathon will be presented to a panel of experienced senior entrepreneurs, engineers, and military and government officials and then sent to the Department of Defense with specific recommendations on the technologies with potential to support them.</p> <p>Ultimately Newell and Felter say they want to use <a href="http://bmntpartners.com/" target="_blank" rel="noopener">BMNT</a> to create an “insurgency” in Silicon Valley to get cutting-edge innovation into the organizations defending our country<i>. </i>(Click <a href="http://h4d2025.launchrock.com" target="_blank" rel="noopener">here</a> for information on Hacking for Defense events.)</p> </div> <p><strong>Hacking the Prime’s<br /> </strong>In reality, what <a style="color:#000000;" href="http://bmntpartners.com" target="_blank" rel="noopener">BMNT</a> is trying to fix is the way the Department of Defense acquires radically new technology and ideas. While <a style="color:#000000;" href="http://www.darpa.mil/default.aspx" target="_blank" rel="noopener">DARPA</a> tries to fill <a style="color:#000000;" href="http://go.usa.gov/3rut4" target="_blank" rel="noopener">that need</a>, today the primary conduits for bringing new technology to the government are the prime contractors (e.g., Lockheed, Boeing, Raytheon, Northrup Grumman, L3, General Dynamics, et al.) But most of these contractors focus on fulfilling existing technology needs that can be profitable.</p> <p>If a startup wants to provide new technology to the Department of Defense (DoD), they have to sell through the prime contractors who own the relationships with the DoD. Most startups and innovative companies are unwilling to risk exposing their Intellectual Property and go through the paperwork of dealing with the government, so they choose not to pursue government ventures. In this way, the primes artificially restrict DoD’s technological funnel. (<a href="https://www.palantir.com" target="_blank" rel="noopener">Palantir</a> is the most visible Silicon Valley insurgent in this space.)</p> <p>Today, incentives for bringing innovation into the government with speed and urgency are not aligned with the government acquisition, budgeting, and requirements process. As a result, the DoD fails to acquire truly innovative technologies (much less paradigm-changing technologies) in a timely fashion.</p> <p><strong style="line-height:1.5;">Lessons Learned</strong></p> <blockquote> <ul> <li>In peacetime the U.S. military is an immovable and inflexible bureaucracy</li> <li>In wartime it can adapt and adopt organizational change with startling speed</li> <li>The Rapid Equipping Force operated with speed and urgency to deliver solutions to real customer problems</li> <li><a href="http://bmntpartners.com" target="_blank" rel="noopener">BMNT</a> and <em>Hacking for Defense </em>are trying to bring this same process to Silicon Valley</li> </ul> </blockquote> <iframe loading="lazy" width="100%" height="66" scrolling="no" frameborder="no" src="https://w.soundcloud.com/player/?url=https%3A%2F%2Fapi.soundcloud.com%2Ftracks%2F199093973&width=false&auto_play=false&hide_related=false&visual=false&show_comments=false&color=false&show_user=false&show_reposts=false"></iframe> <div class="sharedaddy sd-sharing-enabled"><div class="robots-nocontent sd-block sd-social sd-social-official sd-sharing"><h3 class="sd-title">Share this:</h3><div class="sd-content"><ul><li class="share-print"><a rel="nofollow noopener noreferrer" data-shared="" class="share-print sd-button" href="https://steveblank.com/2015/03/31/hacking-for-defense-in-silicon-valley/" target="_blank" title="Click to print" ><span>Print</span></a></li><li class="share-email"><a rel="nofollow noopener noreferrer" data-shared="" class="share-email sd-button" href="mailto:?subject=%5BShared%20Post%5D%20Hacking%20For%20Defense%20In%20Silicon%20Valley&body=https%3A%2F%2Fsteveblank.com%2F2015%2F03%2F31%2Fhacking-for-defense-in-silicon-valley%2F&share=email" target="_blank" title="Click to email a link to a friend" data-email-share-error-title="Do you have email set up?" data-email-share-error-text="If you're having problems sharing via email, you might not have email set up for your browser. 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I listened as Roberto listed the obstacles to the new innovation program at Sprocket, “We’ve created innovation teams in both the business units and in corporate. Our CEO is behind the program. The division general managers have given us their support. But the teams still run into what feel like immovable obstacles in every part of the company. Finance, HR, Branding, Legal, you name it, everyone in a division or corporate staff has an excuse for why we can’t do something, and everyone has the power to say no and no urgency to make a change.”</p> <p>Roberto was frustrated, “How do we get all these organizations to help us move forward with innovation? My CEO wants to fix this and is ready to bring in a big consulting firm to redo all our business processes.”</p> <p>Uh oh…</p> <p>—–</p> <p>As Sprocket’s Chief Innovation Officer, Roberto was a C-level executive responsible for the corporate innovation strategy in a multi-billon dollar company. Over the last 9 months his staff got innovation teams operating with speed and urgency. The innovation pipeline had been rationalized. His groups whole-heartedly adopted and adapted Lean. His organization ran a corporate incubator for disruptive (<a href="https://pwcinnovate.wordpress.com/2010/08/05/innovation-horizons/" target="_blank">horizon 3</a>) experiments and provided innovation support for the divisions for process and business model innovations (<a href="https://pwcinnovate.wordpress.com/2010/08/05/innovation-horizons/" target="_blank">Horizon 1 and 2</a>.) He had an innovation pipeline of hundreds of employees going through weekend hackathons and 45 different innovation teams going through 3-month rapid Lean LaunchPad programs to validate product/market fit.</p> <p>The next day Roberto and I sat together and listed what we knew about the innovation conundrum at Sprocket:</p> <ol> <li>Sprocket is a permanent organization designed to <em>execute</em> a repeatable and scalable business model.</li> <li>Roberto’s innovation teams are temporary organizations designed to <em>search</em> for a repeatable and scalable business model.</li> <li>Sprocket had world-class resources and capabilities in brand, supply chain, distribution, sales force, financial metrics, all <em>tailored to execute the existing business model</em>, not to help search for a new one</li> <li>The resources and capabilities <em>optimized for execution interfere</em> with the processes needed to search for a new business model</li> <li>Sprocket needed <em>new and different processes</em> for innovation <em>while retaining the ones that work well for execution</em></li> <li>Sprocket wanted to use the same organizations that provided support for execution (brand, supply chain, distribution, sales force, financial metrics) to provide support for innovation</li> </ol> <p>Roberto’s group had spent the last 9 months educating the company about why they needed to deliver <em>continuous innovation</em>, and why the execution and innovation teams need to work collaboratively. But while there was lots of theory, posters, memos, and <a href="http://www.merriam-webster.com/dictionary/lip%20service" target="_blank">lip-service</a> to being innovative, it wasn’t working.</p> <p>So what to do?</p> <p>I offered that a top-down revamp of every business process should be a last resort. I suggested that Roberto consider trying a 6-month experimental “Get to Yes” program. His teams, not outside consultants, would write their own innovation processes and procedures.<img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="18402" data-permalink="https://steveblank.com/2015/03/17/getting-to-yes-for-corporate-innovation/get-to-yes/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/get-to-yes.jpg?fit=656%2C670&ssl=1" data-orig-size="656,670" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="Get to Yes" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/get-to-yes.jpg?fit=294%2C300&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/get-to-yes.jpg?fit=468%2C478&ssl=1" class="alignright size-thumbnail wp-image-18402" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/get-to-yes.jpg?resize=147%2C150&ssl=1" alt="Get to Yes" width="147" height="150" /></p> <p><strong>Recognizing the Roadblocks<br /> </strong>Most of the impediments the innovation teams faced were pretty tactical: for example an HR policy that said the innovative groups could only recruit employees by seniority. Or a branding group that refused to allow any form of the Sprocket name to appear on a minimal viable product or web site. Or legal, who said minimal viable products opened the company to lawsuits. Or sales, who shut out innovation groups from doing customer discovery with any existing, or even potential customer. Or finance, who insisted on measuring the success of new ventures on their first year’s revenue and gross margin.</p> <p>We agreed that the goal was <span style="text-decoration:underline;">not</span> to change any of the existing execution processes, procedures, incentives, metrics but rather <em>to write new ones for innovation projects.</em></p> <p>And these innovation policies would grow one at a time <em>as</em> <em>needed</em> from the bottom of the organization, not top down by some executive mandate.</p> <p>If we were successful, innovation and execution policies, processes, procedures, incentives, metrics would then co-exist side-by-side. In their day-to-day activities, the support organizations would simply ask, “Are we supporting an execution process (hopefully 90% of the time) or are we supporting an innovation process?” and apply the appropriate policy.</p> <p><strong>Get to Yes<br /> </strong>The “Get to Yes” program was pretty simple. Every time an innovation team needed a new policy, procedure, etc. from an existing organization (legal, finance, sales, HR, branding, etc.), they submitted a standard Sprocket corporate “Get to Yes” request form. The form was a single page. It asked what policy the innovation group wanted changed, why it wanted it changed, how it wanted the new policy to read, the impact the new policy would have on other policies and organizations, and most importantly the risks to the core existing business.</p> <p>The “Get to Yes” request form looked like this:</p> <p><a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-11.jpg?ssl=1"><img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="18405" data-permalink="https://steveblank.com/2015/03/17/getting-to-yes-for-corporate-innovation/sprocket-get-to-yes-form-page-1/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-11.jpg?fit=1029%2C1543&ssl=1" data-orig-size="1029,1543" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="Sprocket Get to Yes Form page 1" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-11.jpg?fit=200%2C300&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-11.jpg?fit=468%2C702&ssl=1" class="aligncenter size-large wp-image-18405" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-11.jpg?resize=468%2C702&ssl=1" alt="Sprocket Get to Yes Form page 1" width="468" height="702" /></a></p> <p>The appropriate department had <span style="text-decoration:underline;">one week</span> to ask questions, gather information, meet with the innovation team and evaluate the costs and risks of the proposed process. They could either:</p> <ol> <li>approve and adopt</li> <li>suggest modifications that the team agreed with</li> <li>deny the request.</li> </ol> <p>The approval form looked like this:</p> <p><a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-2.jpg?ssl=1"><img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="18411" data-permalink="https://steveblank.com/2015/03/17/getting-to-yes-for-corporate-innovation/sprocket-get-to-yes-form-page-2/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-2.jpg?fit=1026%2C773&ssl=1" data-orig-size="1026,773" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="Sprocket Get to Yes Form page 2" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-2.jpg?fit=300%2C226&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-2.jpg?fit=468%2C353&ssl=1" class="aligncenter size-large wp-image-18411" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/sprocket-get-to-yes-form-page-2.jpg?resize=468%2C353&ssl=1" alt="Sprocket Get to Yes Form page 2" width="468" height="353" /></a></p> <p>Although it was just a one-page form, the entire concept was radical:</p> <ul> <li>The innovation team would be proposing the new process, procedure, metric, etc. – not waiting for one to be written.</li> <li>There was a hard 1-week deadline for the execution team to respond.</li> <li>Yes was the default answer, a No required detailed explanation.</li> <li>Appeals went straight to the Chief Innovation Officer.</li> </ul> <p>The big idea is that Sprocket was going to<em> create innovation by design not by exception, </em>and they were going to<em> do it by co-opting the existing execution machinery.</em></p> <p>The key to making this work was that if the request was denied, it automatically was kicked upstairs to the Chief Innovation Officer – and would be acted on <em>the next week</em>. And it’s there that the execution department had to make its case of why this request should not be approved. (If there was still no agreement, it became an issue for the executive staff.)</p> <p>The time for a process resolution in a billion dollar corporation – two weeks. At Sprocket innovation was starting to move at the speed of a startup.</p> <p><strong>Lessons Learned</strong></p> <blockquote> <ul> <li>Innovation by design, not by exception</li> <li>Execution organizations now manage both execution and innovation</li> <li>Innovation teams write their own process and procedures</li> <li>Innovation policy, process and procedures get written as needed, one at a time</li> <li>Over time a set of innovation processes are created from the bottom up</li> <li>Bias for immediate action not perpetual delay</li> </ul> </blockquote> <iframe loading="lazy" width="100%" height="66" scrolling="no" frameborder="no" src="https://w.soundcloud.com/player/?url=https%3A%2F%2Fapi.soundcloud.com%2Ftracks%2F196672602&width=false&auto_play=false&hide_related=false&visual=false&show_comments=false&color=false&show_user=false&show_reposts=false"></iframe> <div class="sharedaddy sd-sharing-enabled"><div class="robots-nocontent sd-block sd-social sd-social-official sd-sharing"><h3 class="sd-title">Share this:</h3><div class="sd-content"><ul><li class="share-print"><a rel="nofollow noopener noreferrer" data-shared="" class="share-print sd-button" href="https://steveblank.com/2015/03/17/getting-to-yes-for-corporate-innovation/" target="_blank" title="Click to print" ><span>Print</span></a></li><li class="share-email"><a rel="nofollow noopener noreferrer" data-shared="" class="share-email sd-button" href="mailto:?subject=%5BShared%20Post%5D%20Getting%20to%20%E2%80%9CYes%E2%80%9D%20for%20Corporate%20Innovation&body=https%3A%2F%2Fsteveblank.com%2F2015%2F03%2F17%2Fgetting-to-yes-for-corporate-innovation%2F&share=email" target="_blank" title="Click to email a link to a friend" data-email-share-error-title="Do you have email set up?" data-email-share-error-text="If you're having problems sharing via email, you might not have email set up for your browser. 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A failed project is considered a negative to a corporate career. As a result, few people want to start a project that might not succeed. And worse, even if someone does manage to start something new, our management structure has so many financial, legal and HR hurdles that every initiative needs to match our existing business financial metrics, processes and procedures. So we end up in “paralysis by analysis” – moving slowly to ensure we don’t make mistakes and that everyone signs off on every idea (so we can spread the collective blame if it fails). And when we do make bets, they’re small bets on incremental products or acquisitions that simply add to the bottom line.”</p> <p>Bob looked wistful, “Our founders built a company known for taking risks and moving fast. Now we’re known for “making the numbers,” living on our past successes. More agile competitors are starting to eat into our business. How can we restart our innovation culture?”</p> <p>—-</p> <p><strong>What Drives Innovation?<br /> </strong>I pointed out to Bob the irony – in a large company “fear of failure” inhibits speed and risk taking while in a startup “fear of failure” <span style="text-decoration:underline;">drives </span>speed and urgency.</p> <p>If we could understand the root cause of that difference, I said, we could help Acme build a system for continuous innovation.</p> <p>I suggested the best place to start the conversation is with the 21<sup>st</sup> century definition of a startup: <em>A startup is a temporary organization designed to <strong><span style="text-decoration:underline;">search</span></strong> for a repeatable and scalable business model.</em></p> <p>Startups have finite time and resources to find product/market fit before they run out of money. Therefore startups trade off certainty for speed, adopting “<a href="http://steveblank.com/2009/04/10/good-enough-decision-making/">good enough decision making</a>” and iterating and pivoting as they fail, learn, and discover their business model.</p> <p>The corollary for a large company is: <em>A company is a permanent organization designed to <strong><span style="text-decoration:underline;">execute</span></strong> a repeatable and scalable business model.</em></p> <p>That means in their core business, large companies have a series of <span style="text-decoration:underline;">knowns</span>. They’ve found product/market fit (what products customers want to buy). They’ve learned the best distribution channel to get the product from their company to the customer. They’ve figured out the revenue model (subscription, license, direct sale, etc.) and how to price the product. They know the activities, resources and partners (manufacturing, regulation, IP, supply chain, etc.) – and the costs to deliver the product/service and have <a href="http://steveblank.com/2014/03/04/why-companies-are-not-startups/" target="_blank">well defined product development and product management tools </a>that emphasize the linear nature of shipping products to existing customers. There are financial metrics (Return on Investment, Hurdle Rate, etc.) for new product development that emphasize immediate returns. And everyone has job titles and job descriptions that describe their role in execution<b>.</b></p> <p><strong>Why Execution and Innovation Need Different Tools, Cultures and Organizations<br /> </strong>Talking to Bob I realized that at Acme Widgets (and in most large companies) the word “failure” was being used to describe two <span style="text-decoration:underline;">very</span> different events:</p> <ul> <li>failure in <em>execution</em> of a known product in known market</li> <li>failure in <em>searching </em>for innovation when there are many unknowns</li> </ul> <p>Therefore, in a large company, failure to meet a goal – revenue, product delivery, service, etc.– is a failure in <em>execution</em> of an individual and/or organization to perform to a <em>known set of success criteria</em>. In corporations the penalty for repeated failure on known tasks is being reassigned to other tasks or asked to leave the company.</p> <p>As I sat with Bob and his innovation team, I realized that all of Acme’s new product innovation initiatives <em>were being held to the same standard as those of existing products</em>. Acme was approaching innovation and disruptive product ideas using the same processes, procedures, schedules, and incentives within the same organizational structure and culture as its existing businesses.</p> <p>No wonder innovation at Acme had stalled.</p> <p><strong>The Ambidextrous Organization – Execution <span style="text-decoration:underline;">and</span> Innovation<br /> </strong>That companies should be simultaneously executing and innovating isn’t a new insight. For decades <a href="http://www.hbs.edu/faculty/Publication%20Files/O'Reilly%20and%20Tushman%20AMP%20Ms%20051413_c66b0c53-5fcd-46d5-aa16-943eab6aa4a1.pdf" target="_blank">others have observed</a> that companies needed to be ambidextrous. So while we did not lack the insight that execution and innovation need to be separate, <em>we did lack the processes, tools, culture and organizational structures to implement it</em>. Corporate innovation initiatives have spent decades looking at other corporate structures as models for innovation when in fact <em>we should have been looking at startups for innovation models – </em>and adapting and adopting them for corporate use.</p> <p>That’s now changed. <a href="http://steveblank.com/2014/03/04/why-companies-are-not-startups/" target="_blank">The strategy and structure for 21st corporate innovation will come from emulating the speed, urgency, agility</a> and low-cost, rapid experimentation of startups.</p> <p><strong>What We Now Know about Corporate Innovation<br /> </strong>In the last five years, as the need for continuous innovation in companies has become critical, <a href="https://hbr.org/2013/05/why-the-lean-start-up-changes-everything/ar/1" target="_blank">Lean innovation methodologies</a> (Lean LaunchPad/I-Corps) have also emerged. These methods allow rapid experimentation – at startup speed – with the same rigor and discipline as traditional execution processes. Adopted by the National Science Foundation and large companies, over 1000 teams have used the process, and the resulting commercialization success speaks for itself.</p> <p><a href="http://hbr.org/2013/05/why-the-lean-start-up-changes-everything/ar/1"><img data-recalc-dims="1" loading="lazy" decoding="async" class="alignright" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2013/05/hbr-reprint1.jpg?resize=160%2C205" alt="" width="160" height="205" /></a></p> <p>But running a Lean Startup inside an organization designed for execution is an exercise in futility. Working with large corporations we’ve learned that innovation groups need their own structure, culture, tools (<a href="http://steveblank.com/2014/07/30/driving-corporate-innovation-design-thinking-customer-development/" target="_blank">Lean, Design Thinking</a>, etc.), metrics (validated/invalidated hypotheses, <a href="http://steveblank.com/2013/11/25/its-time-to-play-moneyball-the-investment-readiness-level/" target="_blank">Investment Readiness Level</a>) and processes. And both organizations – execution and innovation – need to understand that the success of the company rests on how well they can cooperate.</p> <p>Bob’s eyes lit up as he said, “Now I understand why innovation seemed beyond our reach. We were missing four ideas:</p> <ol> <li>Accepting failure and running at speed are part of an innovation culture.</li> <li>We need to separate out innovation risks from execution risks.</li> <li>There are now proven <a href="https://hbr.org/2013/05/why-the-lean-start-up-changes-everything/ar/1" target="_blank">Lean innovation methodologies</a> (Lean LaunchPad/I-Corps) that we can use off the shelf in building an innovation culture without inventing our own.</li> <li>We need to make sure that management no longer uses execution metrics to manage and judge our innovation teams.</li> </ol> <p><strong>Lessons Learned</strong></p> <blockquote> <ul> <li>In a startup “fear of failure” <span style="text-decoration:underline;">drives </span>speed and urgency</li> <li>In a large company “fear of failure” inhibits speed and risk</li> <li><em>Innovation means experimentation</em> in searching for a business model. Often failure is the norm not the exception.</li> <li>Innovation processes and metrics need to be different from those of the execution organizations</li> <li>There are proven <a href="https://hbr.org/2013/05/why-the-lean-start-up-changes-everything/ar/1">Lean innovation methodologies</a> that work in large existing companies</li> </ul> </blockquote> <iframe loading="lazy" width="100%" height="66" scrolling="no" frameborder="no" src="https://w.soundcloud.com/player/?url=https%3A%2F%2Fapi.soundcloud.com%2Ftracks%2F195590091&width=false&auto_play=false&hide_related=false&visual=false&show_comments=false&color=false&show_user=false&show_reposts=false"></iframe> <div class="sharedaddy sd-sharing-enabled"><div class="robots-nocontent sd-block sd-social sd-social-official sd-sharing"><h3 class="sd-title">Share this:</h3><div class="sd-content"><ul><li class="share-print"><a rel="nofollow noopener noreferrer" data-shared="" class="share-print sd-button" href="https://steveblank.com/2015/03/11/fear-of-failure-and-lack-of-speed-in-a-large-corporation/" target="_blank" title="Click to print" ><span>Print</span></a></li><li class="share-email"><a rel="nofollow noopener noreferrer" data-shared="" class="share-email sd-button" href="mailto:?subject=%5BShared%20Post%5D%20Fear%20of%20Failure%20and%20Lack%20of%20Speed%20In%20a%20Large%20Corporation&body=https%3A%2F%2Fsteveblank.com%2F2015%2F03%2F11%2Ffear-of-failure-and-lack-of-speed-in-a-large-corporation%2F&share=email" target="_blank" title="Click to email a link to a friend" data-email-share-error-title="Do you have email set up?" data-email-share-error-text="If you're having problems sharing via email, you might not have email set up for your browser. 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rel="category tag">Business Model versus Business Plan</a>, <a href="https://steveblank.com/category/corporate-govt-innovation/" rel="category tag">Corporate/Gov't Innovation</a>, <a href="https://steveblank.com/category/customer-development/" rel="category tag">Customer Development</a> | <a href="https://steveblank.com/2015/03/11/fear-of-failure-and-lack-of-speed-in-a-large-corporation/#comments">17 Comments »</a> </p> </div> </div> <div class="post-18337 post type-post status-publish format-standard hentry category-business-model-versus-business-plan category-corporate-govt-innovation category-customer-development category-familycareerculture category-lean-launchpad category-life-sciences-nih category-siriusxm-radio-show category-teaching category-technology category-venture-capital" id="post-18337"> <h2><a href="https://steveblank.com/2015/03/05/im-on-the-air-on-siriusxm-111/" rel="bookmark">I’m on the Air – On Sirius XM Channel 111</a></h2> <div class="postinfo"> Posted on <span class="postdate">March 5, 2015</span> by steve blank </div> <div class="entry"> <p>Starting this Monday, March 9<sup>th</sup> 4-6pm Pacific Time I’ll be on the radio hosting the Bay Area Ventures program on Sirius XM radio Channel 111 – the Wharton Business Radio Channel.<a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/untitled.jpg?ssl=1"><img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="18338" data-permalink="https://steveblank.com/2015/03/05/im-on-the-air-on-siriusxm-111/untitled-2/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/untitled.jpg?fit=395%2C294&ssl=1" data-orig-size="395,294" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="Untitled" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/untitled.jpg?fit=300%2C223&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/untitled.jpg?fit=395%2C294&ssl=1" class="alignright size-thumbnail wp-image-18338" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/untitled.jpg?resize=150%2C112&ssl=1" alt="Untitled" width="150" height="112" /></a></p> <p>Over this program I’ll be talking to entrepreneurs, financial experts and academic leaders in the tech and biotech industries. And if the past is prologue I guarantee you that this will be radio worth listening to.</p> <p>On our first show, <strong>Monday March 9<sup>th</sup> 4-6pm Pacific Time</strong> join me, as I chat with Alexander Osterwalder – inventor of the <a href="http://www.businessmodelgeneration.com" target="_blank">Business Model Canvas</a>, and Oren Jacob, ex-CTO of Pixar and now CEO of <a href="https://www.toytalk.com" target="_blank">ToyTalk</a> on <strong>Sirius XM Radio Channel 111</strong>.</p> <div id="attachment_18341" style="width: 154px" class="wp-caption alignleft"><a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/oren.jpg?ssl=1"><img data-recalc-dims="1" loading="lazy" decoding="async" aria-describedby="caption-attachment-18341" data-attachment-id="18341" data-permalink="https://steveblank.com/2015/03/05/im-on-the-air-on-siriusxm-111/oren/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/oren.jpg?fit=184%2C192&ssl=1" data-orig-size="184,192" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="oren" data-image-description="" data-image-caption="<p>Oren Jacob – CEO ToyTalk</p> " data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/oren.jpg?fit=184%2C192&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/oren.jpg?fit=184%2C192&ssl=1" class="size-thumbnail wp-image-18341" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/oren.jpg?resize=144%2C150&ssl=1" alt="Oren Jacob - CEO ToyTalk" width="144" height="150" /></a><p id="caption-attachment-18341" class="wp-caption-text">Oren Jacob – CEO ToyTalk</p></div> <div id="attachment_18346" style="width: 148px" class="wp-caption alignleft"><a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osterwalder2.jpg?ssl=1"><img data-recalc-dims="1" loading="lazy" decoding="async" aria-describedby="caption-attachment-18346" data-attachment-id="18346" data-permalink="https://steveblank.com/2015/03/05/im-on-the-air-on-siriusxm-111/osterwalder2/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osterwalder2.jpg?fit=145%2C158&ssl=1" data-orig-size="145,158" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="osterwalder2" data-image-description="" data-image-caption="<p>Alex Osterwalder – Business Models</p> " data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osterwalder2.jpg?fit=145%2C158&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osterwalder2.jpg?fit=145%2C158&ssl=1" class="size-thumbnail wp-image-18346" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/osterwalder2.jpg?resize=138%2C150&ssl=1" alt="Alex Osterwalder - Business Models" width="138" height="150" /></a><p id="caption-attachment-18346" class="wp-caption-text">Alex Osterwalder – Business Models</p></div> <p>On Monday’s show we’ll be talking about a range of entrepreneurship topics: what’s a Business Model Canvas, how to build startups efficiently, the 9 deadly sins of a startup, the life of a startup CEO, how large companies can innovate at startup speeds. But it won’t just be us talking; we’ll be taking your questions live and on the air by phone, email or Twitter.</p> <ul> <li>Call 1-844-942-7866</li> <li>Email <a href="mailto:businessradio@siriusxm.com">businessradio@siriusxm.com</a></li> <li>Tweet @BizRadio111</li> </ul> <p>On April 27<sup>th</sup>, on my next program, my guest will be Eric Ries the <a href="http://www.startuplessonslearned.com" target="_blank">author of the Lean Startup</a>. Future guests include Marc Pincus, founder of <a href="https://zynga.com" target="_blank">Zynga</a>, and other interesting founders and investors.</p> <p>Is there anyone you’d like to hear on the air on future shows? Any specific topics you’d like discussed? Leave me a comment.</p> <p>Mark your calendar for 4-6pm Pacific Time on<strong> Sirius XM Radio Channel 111</strong>:</p> <ul> <li>March 9<sup>th</sup></li> <li>April 27<sup>th</sup></li> <li>May 11th</li> <li>June 29th</li> <li>July 13th</li> <li>Aug 24th in NY</li> </ul> <div class="sharedaddy sd-sharing-enabled"><div class="robots-nocontent sd-block sd-social sd-social-official sd-sharing"><h3 class="sd-title">Share this:</h3><div class="sd-content"><ul><li class="share-print"><a rel="nofollow noopener noreferrer" data-shared="" class="share-print sd-button" href="https://steveblank.com/2015/03/05/im-on-the-air-on-siriusxm-111/" target="_blank" title="Click to print" ><span>Print</span></a></li><li class="share-email"><a rel="nofollow noopener noreferrer" data-shared="" class="share-email sd-button" href="mailto:?subject=%5BShared%20Post%5D%20I%E2%80%99m%20on%20the%20Air%20%E2%80%93%20On%20Sirius%20XM%20Channel%20111&body=https%3A%2F%2Fsteveblank.com%2F2015%2F03%2F05%2Fim-on-the-air-on-siriusxm-111%2F&share=email" target="_blank" title="Click to email a link to a friend" data-email-share-error-title="Do you have email set up?" data-email-share-error-text="If you're having problems sharing via email, you might not have email set up for your browser. 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class="share-end"></li></ul></div></div></div><div class='sharedaddy sd-block sd-like jetpack-likes-widget-wrapper jetpack-likes-widget-unloaded' id='like-post-wrapper-6599589-18337-67426ccd37b87' data-src='https://widgets.wp.com/likes/?ver=14.1-a.3#blog_id=6599589&post_id=18337&origin=steveblank.com&obj_id=6599589-18337-67426ccd37b87&n=1' data-name='like-post-frame-6599589-18337-67426ccd37b87' data-title='Like or Reblog'><h3 class="sd-title">Like this:</h3><div class='likes-widget-placeholder post-likes-widget-placeholder' style='height: 55px;'><span class='button'><span>Like</span></span> <span class="loading">Loading...</span></div><span class='sd-text-color'></span><a class='sd-link-color'></a></div> <p class="postinfo"> Filed under: <a href="https://steveblank.com/category/business-model-versus-business-plan/" rel="category tag">Business Model versus Business Plan</a>, <a href="https://steveblank.com/category/corporate-govt-innovation/" rel="category tag">Corporate/Gov't Innovation</a>, <a href="https://steveblank.com/category/customer-development/" rel="category tag">Customer Development</a>, <a href="https://steveblank.com/category/familycareerculture/" rel="category tag">Family/Career/Culture</a>, <a href="https://steveblank.com/category/lean-launchpad/" rel="category tag">Lean LaunchPad</a>, <a href="https://steveblank.com/category/life-sciences-nih/" rel="category tag">Life Sciences (NIH)</a>, <a href="https://steveblank.com/category/siriusxm-radio-show/" rel="category tag">SiriusXM Radio Show</a>, <a href="https://steveblank.com/category/teaching/" rel="category tag">Teaching</a>, <a href="https://steveblank.com/category/technology/" rel="category tag">Technology</a>, <a href="https://steveblank.com/category/venture-capital/" rel="category tag">Venture Capital</a> | <a href="https://steveblank.com/2015/03/05/im-on-the-air-on-siriusxm-111/#comments">7 Comments »</a> </p> </div> </div> <div class="post-18297 post type-post status-publish format-standard hentry category-business-model-versus-business-plan category-customer-development category-lean-launchpad category-nsf-national-science-foundation category-teaching" id="post-18297"> <h2><a href="https://steveblank.com/2015/03/03/u-c-berkeley-haas-business-school-blowing-up-the-business-plan-the-lean-launchpad-i-corps/" rel="bookmark">Blowing up the Business Plan at U.C. Berkeley Haas Business School</a></h2> <div class="postinfo"> Posted on <span class="postdate">March 3, 2015</span> by steve blank </div> <div class="entry"> <p>During the Cold War with the Soviet Union, science and engineering at both Stanford and U.C. Berkeley were heavily <a href="http://steveblank.com/secret-history/" target="_blank" rel="noopener noreferrer">funded to develop Cold War weapon systems</a>. Stanford’s focus was Electronic Intelligence and those advanced microwave components and systems were useful in a variety of weapons systems. Starting in the 1950’s, Stanford’s engineering department became “outward facing” and developed a culture of spinouts and active faculty support and participation in the first wave of Silicon Valley startups.</p> <p>At the same time Berkeley was also developing Cold War weapons systems. However its focus was nuclear weapons – not something you wanted to be spinning out. So Berkeley started a half century history of “inward facing innovation” focused on the <a href="https://www.google.com/search?num=100&client=safari&rls=en&q=Lawrence+Livermore&spell=1&sa=X&ei=EvLuVIXKEsPfoATP04CYBA&ved=0CBwQvwUoAA" target="_blank" rel="noopener noreferrer">Lawrence Livermore</a> nuclear weapons lab. (See the presentation <a href="http://www.slideshare.net/sblank/secret-history-why-stanford-and-not-berkeley" target="_blank" rel="noopener noreferrer">here</a>.)</p> <p>Given its inward focus, Berkeley has always been the neglected sibling in Silicon Valley entrepreneurship. That has changed in the last few years.</p> <p>Today the U.C. Berkeley Haas Business School is a leader in entrepreneurship education. It has replaced how to write a business plan with hands-on Lean Startup methods. It’s teaching the LaunchPad<sup>® </sup>and the <a href="http://venturewell.org/i-corps/" target="_blank" rel="noopener noreferrer">I-Corps</a> for the National Science Foundation and National Institutes of Health, as well as corporate entrepreneurship courses.<a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-logo.jpg?ssl=1"><img data-recalc-dims="1" loading="lazy" decoding="async" data-attachment-id="18313" data-permalink="https://steveblank.com/2015/03/03/u-c-berkeley-haas-business-school-blowing-up-the-business-plan-the-lean-launchpad-i-corps/haas-logo/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-logo.jpg?fit=319%2C158&ssl=1" data-orig-size="319,158" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="haas logo" data-image-description="" data-image-caption="" data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-logo.jpg?fit=300%2C149&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-logo.jpg?fit=319%2C158&ssl=1" class="alignleft size-thumbnail wp-image-18313" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-logo.jpg?resize=150%2C74&ssl=1" alt="haas logo" width="150" height="74" /></a></p> <p>Here’s the story from <a href="http://entrepreneurship.berkeley.edu/about-us/mission/andre-marquis/" target="_blank" rel="noopener noreferrer">Andre Marquis, Executive Director</a> of Berkeley’s Lester Center for Entrepreneurship.</p> <p><strong>—–</strong></p> <p>When I came to U.C. Berkeley in 2010 to run the <a href="http://entrepreneurship.berkeley.edu" target="_blank" rel="noopener noreferrer">Lester Center for Entrepreneurship</a> in the Haas School of Business we were teaching entrepreneurship the same way as when I was a student back in 1995. Our core MBA class used the seminal textbook <a href="http://www.amazon.com/gp/product/0071276327?ie=UTF8&tag=wwwsteveblank-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0071276327" target="_blank" rel="noopener noreferrer"><em>New Venture Creation</em></a> by Jeffrey Timmons of Babson College that was first published in 1977. The final deliverable for that class was a 30-page business plan. We had multiple business plan competitions. As I looked around at other schools, I saw pretty much the same landscape – business plan classes, business plan competitions and loosely coupled accelerators that focused primarily on mentoring.</p> <p>Over my career as a serial entrepreneur I observed that since the late 1990s, no early-stage Silicon Valley investor had used business plans to screen investments. Even those who asked for them never read them. Traction and evidence from customers were what investors were looking for – even in “slow” sectors like healthcare and energy. There had been tectonic shifts in the startup world, but our business school curriculum had barely moved.</p> <p>There was a big gap in our educational paradigm. To create great entrepreneurs, we had to give our students the experience of navigating the chaos and uncertainty of running a lean startup while providing the same kind of rigorous framework the business plan did in its day. The advantage of following <em>New Venture Creation</em> is that it had a deep pedagogical infrastructure that students took away after they left school. The disadvantage is that its methodology was based on the old waterfall model of product development and not the agile and lean methods that startups use today.</p> <p>As I began my search to increase the relevance of our entrepreneurship curriculum with the same rigor as Timmons and <em>New Venture Creation,</em> I found the answer right here at Berkeley, in Steve Blank’s Lean LaunchPad class.</p> <p>(Our founding Executive Director Jerry Engel, recently retired to become dean of faculty for the National Science Foundation I-Corps, had a tradition of incorporating leading practioners, like Steve. These ‘pracademics’ proved to be some of the biggest innovators in entrepreneurship education.)</p> <p><strong>Seeing Is Believing<br /> </strong>The Lean LaunchPad class was completely different from a traditional entrepreneurship class. It taught lean theory (<a href="http://businessmodelgeneration.com/canvas/bmc" target="_blank" rel="noopener noreferrer">business model design</a>, <a href="http://www.startuplessonslearned.com/2008/11/what-is-customer-development.html" target="_blank" rel="noopener noreferrer">customer development</a> and agile engineering) <span style="text-decoration:underline;">and</span> practice.</p> <p>Every week, each student team stood in front of the class and presented their business model hypotheses, what they had learned from talking to customers, demo’d their minimal viable products and had to explain what they were going to do next. Steve and the venture capitalists at the back of the room relentlessly peppered them with questions and pushed them to get out of the building and call on the real decision-makers instead of talking to people they already knew. Some teams stepped down from the podium proud that they had made real progress that week while others were chastised because they stuck to their comfort zone, were not doing the tough work required by entrepreneurs and on the road to failure.</p> <p>I realized this class was teaching students exactly what it felt like to be an entrepreneur! Great entrepreneurs are on a search for the truth, no matter how wrong their initial conception is. Being an entrepreneur is about starting out with no idea whether you are working on the next big thing or something no one wants and certainly no one will pay for. It’s struggling to find the right path forward through chaos and uncertainty. Killing bad ideas quickly and moving on. Staring at the phone while mentally wrestling to pick it up to make that next cold call. It’s having investors tell you that you’re dead wrong and, perhaps with enough customer traction, showing them the path to a new future neither of you could see at the time.</p> <p>And there it was. The Lean LaunchPad was unlike any class I’d ever seen.</p> <p>As a Silicon Valley entrepreneur I had lived the lean approach, yet I had never seen it taught. Done informally as part of an accelerator, yes, but not with a framework based on a clear process and clear pedagogy. The Lean LaunchPad was teaching students concepts and a process that they took away from the class and could use again for their next startup. I realized I was looking at a paradigm shift in entrepreneurial education – away from the business plan-focused model to a Lean Startup model. (The irony is that once you’ve gone through the lean cycle, you have all the information that goes in a business plan: customers, sales strategy, product features, and financial metrics. It’s just that they are validated instead of made up.)</p> <p><strong>The Business Plan is Dead<br /> </strong>Now, 4 years after I arrived at BerkeleyHaas, we don’t teach business plan writing in any of our entrepreneurship classes or in any of our dozens of <a href="http://entrepreneurship.berkeley.edu" target="_blank" rel="noopener noreferrer">programs and competitions</a>. We use Customer Development and the Lean LaunchPad to train and accelerate teams U.C. Berkeley-wide.</p> <p>We’ve gone global as well. In the past year alone, we’ve taught over <em>250 teams, over 1,000 entrepreneurs and their mentors in dozens of countries</em> how to create scalable startups in domains from software and hardware to healthcare and energy.</p> <div id="attachment_18300" style="width: 313px" class="wp-caption alignright"><a href="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-global-footprint.jpg?ssl=1"><img data-recalc-dims="1" loading="lazy" decoding="async" aria-describedby="caption-attachment-18300" data-attachment-id="18300" data-permalink="https://steveblank.com/2015/03/03/u-c-berkeley-haas-business-school-blowing-up-the-business-plan-the-lean-launchpad-i-corps/haas-global-footprint/" data-orig-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-global-footprint.jpg?fit=1218%2C504&ssl=1" data-orig-size="1218,504" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"}" data-image-title="" data-image-description="" data-image-caption="<p>Haas global footprint</p> " data-medium-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-global-footprint.jpg?fit=300%2C124&ssl=1" data-large-file="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-global-footprint.jpg?fit=468%2C194&ssl=1" class=" wp-image-18300" src="https://i0.wp.com/steveblank.com/wp-content/uploads/2015/03/haas-global-footprint.jpg?resize=303%2C125&ssl=1" alt="Haas global footprint" width="303" height="125" /></a><p id="caption-attachment-18300" class="wp-caption-text">Haas global footprint</p></div> <p>The international teams <a href="https://www.udacity.com/course/ep245" target="_blank" rel="noopener noreferrer">watch the lectures online</a>, get out of the building, present to us each week via WebEx and get the same brand of relentless and direct feedback their U.C. Berkeley peers got in Steve’s class. For example, our <a href="http://t2ma.org" target="_blank" rel="noopener noreferrer">Intel Technology To Market Accelerator</a> took 22 teams from 11 countries across 15 time zones, from northern Russia to southern Chile and from Saudi Arabia to the U.S. (Chicago) through the Lean LaunchPad process. Clearly, lean works globally.</p> <p>And we’ve been part of the U.S. effort to use the Lean LaunchPad to accelerate commercialization for the country’s best research spinouts from the National Science Foundation and National Institutes of Health. We do this by running classes for the <a href="http://www.nsf.gov/news/special_reports/i-corps/" target="_blank" rel="noopener noreferrer">NSF Innovation Corps</a> and The <a href="http://sbir.cancer.gov/resource/icorps/" target="_blank" rel="noopener noreferrer">I-Corps at the NIH</a>. And the same lean techniques work just as well in the corporate innovation programs we run such as the Intel <a href="http://makeit.intel.com" target="_blank" rel="noopener noreferrer">Make It Wearable Challenge</a>.</p> <p>An important distinction is that these programs are accelerators. The teams in them start with an idea or product, meet with customers, build prototypes and search for a scalable business model. All declare their startup a “go” or “no go” at the end. They learn it’s all about building to scale, pivoting or declaring failure, and moving on using a hypothesis-driven search for the truth.</p> <p>Even our venerable 15-year old business plan competition, once dubbed “bplan,” has transformed into <a href="http://launch.berkeley.edu" target="_blank" rel="noopener noreferrer">LAUNCH</a>, a multi-month accelerator with a rigorous process combining the Lean LaunchPad, agile product development and a focus on measurable <a href="http://www.amazon.com/gp/product/1449335675/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1449335675&linkCode=as2&tag=wwwsteveblank-20&linkId=QHMCKJO7DVQHOZKG" target="_blank" rel="noopener noreferrer">Lean Analytics</a>. Ironically, LAUNCH has turned out to be much <span style="text-decoration:underline;">more</span> rigorous than the prior business plan competition because we immerse every entrepreneur and their mentors in conquering the chaos and uncertainty that is normal for startups. We expect them to come out with specific knowledge of their markets and business ecosystem, verified metrics, a product and a plan for moving forward based on interacting with their actual customers – not honing the teams for a beauty pageant-like pitch fest or making them produce a business plan that’s fundamentally speculative. As educators, we are having a deep impact on these entrepreneurs and their startups.</p> <p><strong>Lean LaunchPad Works Across Industries<br /> </strong>I often hear the concern that the Lean LaunchPad only works for software. After 700 teams in robotics, materials, hardware, therapeutics, diagnostics, medical devices, and enterprise software, it’s clear that Lean Startup methods work across all industries. We’ve taught versions of the Lean LaunchPad for life sciences at <a href="http://ita.ucsf.edu/entrepreneurship-center" target="_blank" rel="noopener noreferrer">UCSF</a> and as part of the National Institutes of Health, for hardware-focused startups making wearable devices as part of the Intel Make It Wearable Challenge, for teams working on nanotechnology and in education (STEMKids and Build and Imagine). Two of our BerkeleyHaas Faculty, <a href="http://facultybio.haas.berkeley.edu/faculty-list/calderon-jorge" target="_blank" rel="noopener noreferrer">Jorge Calderon</a> and Will Rosenzweig, created a Social Lean LaunchPad class that embraces the mission and stakeholders central to social ventures.</p> <p>Whether it’s making iPhone apps or medical devices, every startup is looking for a repeatable and scalable business model. Focusing on finding customer needs, figuring out how they buy and how to scale up product delivery are universal.</p> <p><strong>Where We Are Going From Here<br /> </strong>At U.C. Berkeley we’ve undergone a complete transformation in just four years. But the longer journey is to continue to build new lean-tools and classes separate from the 40 year-old, business plan-based tradition.</p> <p>We continue to ask ourselves, “What can we do to get our students out of the classroom, in cross-functional teams, building for specific customers and having the experience of making hard decisions under conditions of uncertainty? What can we do to expand and deepen the rigor of the Lean Startup methodologies and fully elaborate our curriculum?”</p> <p>At BerkeleyHaas we are sharing what we are learning (see below). By embracing lean, you can be assured you will be giving your students essential innovation skills they will use for the rest of their lives. You will see great startups focused on solving real customer problems emerge as well. This is an exciting journey and we are all right at the start.</p> <p>Some resources for shifting the paradigm in your organization:</p> <ul> <li><a href="http://entrepreneurship.berkeley.edu" target="_blank" rel="noopener noreferrer">Lester Center for Entrepreneurship</a></li> <li><a href="http://venturewell.org/i-corps/" target="_blank" rel="noopener noreferrer">VentureWell Resources for I-Corps</a></li> <li><a href="http://venturewell.org/i-corps/llpvideos/" target="_blank" rel="noopener noreferrer">VentureWell Lean LaunchPad Master Video Library</a></li> <li><a href="http://www.hypershift.org" target="_blank" rel="noopener noreferrer">Hypershift in corporate innovation</a></li> </ul> <p><strong>Lessons Learned</strong></p> <blockquote> <ul> <li>Early-stage investors don’t read business plans</li> <li>We are in the middle of a shift in entrepreneurship education from teaching the waterfall model of startup development (enshrined in business plans) to teaching the lean startup model</li> <li>The Lean LaunchPad process works across a wide range of domains – from science and engineering to healthcare, energy, government, the social sector and for corporate innovation</li> <li>Customer Development works outside Silicon Valley. In fact, it works globally</li> <li>The Lean LaunchPad is a business process that teaches entrepreneurs and innovators to make business-focused, evidence-based decisions under conditions of chaos and uncertainty. 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class="linkcat"><h2>Customer Development</h2> <ul class='xoxo blogroll'> <li><a href="http://www.slideshare.net/sblank" rel="noopener" target="_blank">Customer Development Methodology – slides</a></li> <li><a href="http://startuplessonslearned.blogspot.com/search?q=%22customer+development%22" rel="noopener" target="_blank">Eric Ries on Customer Development</a></li> <li><a href="http://www.amazon.com/Four-Steps-Epiphany-Steven-Blank/dp/0976470705" rel="noopener" title="My book about Customer Development and more" target="_blank">Four Steps to the Epiphany – the book</a></li> <li><a href="http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2048" rel="noopener" target="_blank">Stanford Entrepreneurial Leadership Talks by Steve Blank</a></li> <li><a href="http://www.slideshare.net/startuplessonslearned/lean-startup-presentation-to-maples-investments-by-steve-blank-and-eric-ries-presentation" rel="noopener" target="_blank">The Lean Startup by Eric Ries & Steve Blank – slides</a></li> 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