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 the final four contestants. The finals were held in the packed 800 seat BYU Varsity Theater with lines of students outside unable to get in. It was an eye-opener to see each of the teams take the stage to describe their journey in trying to validate each of the 9 parts of a business model, rather than the static theory of a business plan.

Each team used the business model canvas and customer development stack to go from initial hypotheses, getting outside the building to validate their ideas with customers, and going through multiple pivots to find a validated business model. The winner was Gamegnat, a gaming information portal (take a look at their presentation here.) At the end of the competition Gavin Christensen, managing director of Kickstart Seed Fund said, “This is going to change the way we invest.” A nice testament to the visible difference in the quality of every teams presentation. The competition was an inspiration to the students, mentors and teaching teams.

Utah: Entrepreneurial Surprises
While I was in Utah, my host kept me busy with a series of talks. I spoke at lunch to a room of 400 entrepreneurs and investors from the region about the business model / customer development stack. I was quite surprised to find the depth and interest in innovation and sheer number of startups that I saw. I was even more surprised to learn that University of Utah has gone from being ranked 94th in the U.S. for startups created from university intellectual property to number one.

When I met with the faculty and Deans at BYU they were proud to tell me that they were number one in the U.S. for startups, licenses, and patent applications per research dollar. BYU has embraced an e-school approach, changing their curriculum to develop and teach the ideas in the business model / customer development stack. Their vision is to make the Business Model Competition an even larger international event, creating competitions at partner schools and providing the materials and insight to create a network of business model competitions culminating in an international finals event. And they are ready to share!

Keep your eye out for more details about creating your own competition, or contact Nathan Furr directly.

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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