Entrepreneurship for the 99 Percent

6/4/12Follow @jeromesengel

As the morning fog burns off the California coast, I am working with Steve Blank, preparing for the Lean LaunchPad Faculty Development Program we are running this August at U.C. Berkeley. This is a three-day program for entrepreneurship faculty from around the world to learn how to teach entrepreneurship via the Lean LaunchPad approach (business model canvas + customer development) and bring their entrepreneurship curriculums into the 21st century. Over the past couple of years this Lean LaunchPad model has proven immensely effective at Berkeley, Stanford, Columbia and, of course, the National Science Foundations Innovation-Corps program. The data from the classes seem to indicate that we’ve found have a method how to make scalable startups fail less.

While we’re excited by the results, we’ve realized that we’ve been solving the problem for the 1 percent of new ventures that are technology startups. The reality is that the United States is still a nation of small businesses. 99.7 percent of the ~6 million companies in the U.S. have less than 500 people and they employ 50 percent of the 121 million workers getting a paycheck. They accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009. And while they increasingly use technology as a platform and/or a way of reaching and managing customers, most are in non-tech businesses (construction, retail, health care, lodging, food services, etc.).

While we were figuring out how to be incredibly more efficient in building new technology startups, three out out of 10 new small businesses will fail in two years, and half fail within five years. The tools and techniques available to small businesses on Main Street are the same ones that were being used for the last 75 years.

Therefore, our remaining challenges are how to make them fail less—and how can we make the Lean LaunchPad approach relevant to the rest of the 99 percent of startups.

Serendipity

A serendipitous answer came to us around noon. His name is Alex Lawrence. Alex is vice provost for innovation & economic development at Weber State University in Utah and is completing his first year of teaching entrepreneurship. Alex is a successful serial entrepreneur—with the same drive and energy of many we have known here in Silicon Valley, but different. His nine startups have ranged from franchised fruit juice shops to Lendio, a financial services company for small businesses. Alex had been recruited back by his alma mater to create an entrepreneurship program. In fact he had just been charged with creating an entrepreneurship minor—five or six courses for students of any major at the University that would help prepare them for the challenge of starting their own businesses.

Alex’s first insight was that the traditional “how to write a business plan” was as obsolete for Main Street as it is for Silicon Valley. So he had adopted Steve’s Lean LaunchPad class and was using The Startup Owner’s Manual as his core text. He had contacted us seeking advice on developing his curriculum, and it just seemed natural to invite him out to the ranch for a deeper dive.

As we dug into learning about Alex’s teaching experience we naturally asked him about the ventures his own students were creating. It was clear Alex was a bit apologetic; photo studios, online retail subscriptions to commodity household and personal hygiene products, etc. Alex explained that in his community building a successful venture that generated nice cash flows—not IPOs—were the big win. To his students these were not “small businesses,” but “their businesses,” their livelihoods and their opportunities to create wealth and independence for themselves and their families.

Mismatch for Main Street

As we walked out to the pond, Alex explained that while he found the teachings of the Lean LaunchPad directly applicable and effective, there was a mismatch for his students in the size of the end goal (a great living versus a billion dollar IPO) and the details of the implementation of the business model (franchise and multilevel marketing versus direct sales, profit sharing versus equity for all, family and SBA loans versus venture capital, etc.).

Sitting by the pond we had a second epiphany: we could easily adjust the Lean LaunchPad class to bring 21st century entrepreneurship techniques to “Main Street.” To do this we needed to do is change the end goals and implementation details to match the aspirations and realities that these new small businesses face.

We called this Mainstream Entrepreneurship.

Mainstream Entrepreneurship

Mainstream Entrepreneurship recognizes that with the Lean LaunchPad class we now have a methodology of making small businesses fail less. That accelerating business model search and discovery and using guided customer engagement as a learning process, we could help founders of mainstream businesses just like those starting technology ventures.

For the rest of the afternoon, Steve and I brainstormed with Alex about how he could take his 20 years of entrepreneurial small business experience and use the Business Model Canvas and Customer Development to create a university entrepreneurship curriculum and vocabulary for the mainstream of American Business.

We think we got it figured out.

Alex Lawrence will be one of the presenters at the Lean LaunchPad Educators Program August 22-24 in Berkeley.

Lessons Learned

  • Small businesses make up 99.7 percent of U.S. companies
  • “How to write a business plan” is as obsolete for Main Street as it is for Silicon Valley
  • Using the Lean LaunchPad (the business model canvas and Customer Development) are the right tools
  • Small businesses have different end goals and implementation details
  • We can adapt/modify the Lean LaunchPad approach to embrace these goals/details

Jerome Engel is faculty director of the National Science Foundation Innovation Corps and founding faculty director of the Lester Center for Entrepreneurship at the Univerisity of California, Berkeley Follow @jeromesengel

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  • http://httpcolonslashslashwww.www.startupjerkfest.com StartUpJerkFest

    Exciting to think of this, unfortunately my limited experience with small business owners leads me to believe that most of them won’t have the discipline to undertake such a task. Perhaps you will find the same conclusions, and your initial investigations will change your hypothesis about the overall market opportunity. Or perhaps you will find better prospects to experiment upon.
    Probably only AFTER they fail will they be mildly interested in trying a new approach. I look forward to reading more.

  • http://www.carlease.uk.com/ CarLease UK

    An interesting article, as a small business owner in the UK, I am aware of some of the factors discussed, it is interesting to consider the entrepreneur from an academic perspective. I have no doubts that there are people out there who as yet do not realize their potential as an entrepreneur and perhaps a credible framework of guidance might be the catalyst. I do see the point posted under that many entrepreneurs may only look for a framework supported approach after experiencing some type of business failure.