In Utah, Developing the Science of Entrepreneurship

1/27/11Follow @sgblank

Utah may be known for many things, but who would have thought that Utah, and particularly Brigham Young University (BYU), would be participating in the transformation of entrepreneurship?

I spent last weekend in Utah at BYU as a guest of Professor Nathan Furr, (a former Ph.D. student of our MS&E department at Stanford,) where they are set on being a leader in developing the management science of entrepreneurship. The most visible step was the first International Business Model Competition, hosted by the BYU Rollins Center for Entrepreneurship and Technology.

What’s A Startup?
We’ve been teaching that the difference between a startup and an existing company is that existing companies execute business models, while startups search for a business model. (Or more accurately, startups are a temporary organization designed to search for a scalable and repeatable business model.) Therefore the very foundations of teaching entrepreneurship should start with how to search for a business model.

This startup search process is the business model / customer development / agile development solution stack. This solution stack proposes that entrepreneurs should first map their assumptions (their business model) and then test whether these hypotheses are accurate, outside in the field (customer development) and then use an iterative and incremental development methodology (agile development) to build the product. When founders discover their assumptions are wrong, as they inevitably will, the result isn’t a crisis, it’s a learning event called a pivot—and an opportunity to update the business model.

Business Model Versus Business Plan
The traditional business plan is an essential organizing and planning document to launch new products in existing companies with known customers and markets. But this same document is a bad fit when used in a startup, as the customers and market are unknown. A business plan in a startup becomes an exercise in creative writing with a series of guesses about a customer problem and the product solution. Most business plans are worse than useless in preparing an entrepreneur for the real world as “no business plan survives first contact with customers.”

I suggested that if we wanted to hold competitions that actually emulated the real world (rather than what’s easy to grade) entrepreneurship educators should hold competitions that emulate what entrepreneurs actually encounter—chaos, uncertainty and unknowns. A business model competition would emulate the “out of the building” experience of real entrepreneurs executing the customer development / business model / agile stack.

The 47th (-46) Annual Business Model Competition
From the seed of this initial idea last summer Professor Nathan Furr, and his team at BYU created a global business model competition, receiving over 60 submissions from across the world. Alexander Osterwalder, Professor Furr and I were the judges for selecting the winner from … Next Page »

Steve Blank is the co-author of The Startup Owner's Manual and author of the Four Steps to the Epiphany, which details his Customer Development process for minimizing risk and optimizing chances for startup success. A retired serial entrepreneur, Steve teaches at Stanford University Engineering School and at U.C. Berkeley's Haas Business School. He blogs at www.steveblank.com. Follow @sgblank

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