Complete Lean Entrepreneurship Guide

New Lean Entrepreneurship Chart

After a couple of years in the making, the badly needed Lean Entrepreneurship Guide has been published. It will be introduced at the upcoming entrepreneurship organization conference, the USASBE, in St. Petersburg, FL January 23-26. A six-page, laminated chart, the guide summarizes all 15 methods of evidenced-based, lean startup planning. It features the Steve Blank Lean Launch Pad method, but also has two engineering school methods, a complete glossary, a detailed lean course outline, and an explanation of the customer development process.

The evidenced-based, idea validation way of planning is the most important change to entrepreneurship education in fifty years. It comes out of Silicon Valley where their new internet platform required a different way to do startup than a traditional business plan. It has evolved over a decade with various refinements and adaptions. Absorption of some ten books is now required to grasp the meaning of lean startup. This guide is the first real summary of all methods and the strategies. Students, aspiring entrepreneurs, and government entities can use the guide to train the one method that guarantees success or failure before scaling or risking large sums of capital.

It’s purpose is to answer two questions. Not “can this product be built”, but “should this product be built” and “can we build a sustainable business around this product or service”? To answer these questions the user engages in a customer development process using a one-page diagram called the business model canvas (BMC). Its nine component sections force a thorough analysis of the idea by diving deep into the mind and persona of the end-user or target buyer. The nine BMC sections are value proposition, customer segments, channels, customer relationships, revenue streams, key activities, key resources, key partnerships, and cost structure. A key to the process is the relationship between the first two components, the value proposition and its customer segments. Get this “product-market fit” right, and the remainder canvas sections become easier to complete.

Entrepreneurs know before spending precious capital and before making the decision to scale or hire employees whether their idea for concept is a “go” or a “no go”. You can imagine how meaningful this insight can be. Under the obsolete traditional business plan, a planner might spend a year and a half doing secondary research, arriving at assumptions based on guesses. Under lean the same planner reaches facts based on customer inputs and establishes a market demand ahead of time.

Why is this change so important? Never has there been a greater need to empower adult workers. Our entire employment structure is undergoing a fundamental change. Anything that can be repeated is being automated. For example, most cars today are manufactured by robots. At the same time the Gig Economy has transformed employees from salaried to independent contractors. Intuit predicts that by 2020 40% of American workers will be independent contractors. And, the ability of computers to learn and think using large-scale data (called “deep learning”) has taken artificial intelligence to new levels. As the “machines” learn to think they are actually replacing white-collar as well as blue-collar workers.

What is so great about lean entrepreneurship is workforce centers, economic development bodies in addition to academic institutions can now successfully teach entrepreneurship. Studies confirm it can be taught and learn and now effectively thanks to evidenced-based and customer validation planning. This new guide contains all the ways of doing its process. In addition to detailed actions, it contains every known resource, the history of “lean”, various options for analytical canvases, ways to increase opportunity recognition, the principles of effectuation (decision-making factors expert entrepreneurs used), and other important model discovery books. Most significantly, there is a detailed Understanding Lean Startup course that can be adapted for personal use.

The Lean Entrepreneurship Guide can help displaced employees start a business in a field they embrace, it can advance technology, improve existing procedures and products, and solve many problems. Moreover it can help society by raising standards of living, bring solutions to environmental concerns, and grow third world economies to stem unemployment. In short this publication is a game changer!

 

Three Stories Every Entrepreneur Should Know.

What would you say your company does? It seems like a simple question that should have a simple answer, but that’s rarely the case.

Here’s something I’ve done over my 20+ years as an entrepreneur to keep everyone focused on the tasks at hand while also keeping an eye on the future.

Entrepreneurs usually blur the lines of what their startup is, what it will be, and what it should be. This is fine until you try to start planning around those stories. At that point, you need to be asking: What are the priorities today and how do we execute on those priorities without mortgaging the future? The reverse question is just as important: How much time do we spend working on those new things that aren’t generating revenue yet?

The Three Story Rule

Every startup should have three stories, loosely related to the three arcs most storytellers use in episodic storytelling. An easy way to think about it is a television series. When you watch an episode of a TV show, the writers are usually working on three storylines:

Story A: Story with an arc that begins and ends in this episode (or maybe a two-parter).

Story B: Story with a longer arc that lasts a few episodes or more. This current episode will advance the plot of Story B in smaller increments, and maybe drop a twist in here or there.

Story C: Story with a much longer arc, maybe out to the end of the season or the end of the series itself. This current episode might not advance Story C at all, or it may just drop a few hints. At the end of the season or the series, you’ll be able to look back and piece Story C together, but that won’t be easy or even possible in real time.

Now let’s take that story strategy and apply it to your startup, and I’ll use my most recent startup as an example.

Story A: Right Now

Story A is the what your company is doing today that is generating revenue, building market share, and adding value to the company. Story A is about this fiscal quarter, this fiscal year, and next fiscal year.

At Automated Insights, Story A was our story for the first few years while we were known as Statsheet, a company that aggregated sports statistics and turned them into visualizations and automated content. This is how we made our money — either using our own data to generate content or using data like Yahoo Fantasy Football to generate Fantasy Matchup Recaps.

While we were breaking new ground in the arena of sports stats, we were one player in a sea of players, and while automating content from sports stats gave us a competitive advantage, sports was still a highly commoditized and difficult marketplace.

Story B: What’s Next

Story B is what’s going to open up new markets using new technologies or new products. Story B is about what you could do if the stars aligned properly or if you raised enough money for a longer runway, because Story B usually comes with a lot more risk for a lot more reward.

A few years into Statsheet, when we went to raise our Series A round, we pitched using our proprietary automated content engine on all kinds of data, generating machine-written stories in finance, marketing, weather, fitness, you name it. We changed our name to Automated Insights and pivoted completely with a $5 million raise.

That pivot came with a ton of risk. We had friends (and potential acquirers) in sports and we would now be making sports just a part of our story. In return, we would be one of the first players in the nascent Natural Language Generation (NLG) market, a pre-cursor to the “AI” market.

It was not a coincidence that the acronym for our new company name was also AI.

Story C: The Billion-Dollar Story

Story C usually involves a seismic change that disrupts existing markets, and as you can imagine, it’s a million times more difficult to pull off.

Uber and Lyft are on Story C. They’re no longer known as a better taxi or for solving a specific problem. They’re about creating a market in which a large portion of people can no longer live without them. In most urban areas, ride hailing services are now a necessity, as the ability they offer to do more things cheaply has made a major impact on lifestyle. There’s just no going back.

Story C was actually where my vision split from my former startup. I was focused more on real-time, plain-word insights generated from a mesh of private and public data, i.e. Alexa, Google Assistant, and Siri. The company was turning towards more of a B2B approach, first as a SaaS NLG tool, and then as a business intelligence tool.

No one was wrong here, but the latter was the direction the company took. So now I’m working on a new Story A at a new startup. And I’ve got Stories B and C in my purview.

So which story do you tell? Well, it depends on who you’re talking to.

For the press, for customers, and for potential employees, stick to Story A — if these folks aren’t jazzed about Story A, then you’re not spending enough time on Story A.

In fact, you should consider Story B and Story C to be intellectual property. It’s not the kind of thing you want to go too deeply into without an NDA or some protection in place.

For your board, your investors, and your employees, focus on Story A, of course, but also keep them aware of Story B and drop hints about Story C. Story B is where you’re headed next. It might be what you raise your next round on, or it may be your next big pivot. Story C is best kept in the distance until you’ve crushed Story A and made significant progress on Story B. It’s a goal, mainly, and you should just be making sure you’re not closing doors to it as you move forward.

Once you get your stories straight, then it’s just about execution. But come back to them often, every quarter or even every sprint, and make sure everyone is still on the same page.

Article from Medium Daily Digest by Joe Procopio.

Ultimate Lean Startup, New Summary Chart.

No More Doubt or Problems Understanding Lean Entrepreneurship

Ever since Silicon Valley (Steve Blank, Alexander Osterwalder, Eric Ries, Bill Aulet and others) gave us the evidence-based or lean startup as a more certain validation method to build a new startup, folks have had trouble understanding the concept.  Well, no more.  Two new publications have taken care of any gaps:

1. The Growth Hackers Ultimate Definition re-printed below and

2. The new Lean Entrepreneurship Chart, a summary of all 15 methods.

The latter will be published this month after introduction at the annual USASBE Conference in St. Petersburg, FL 23-26 January.  USASBE is the largest organization of entrepreneurship education hosting over 540 scholars and instructors.

By the end of February it will be available on Amazon.com under lean entrepreneurship chart or author page Clinton E. Day: https://www.amazon.com/Clinton-E.- Day/e/B017UZNIBK%3Fref= dbs_a_mng_rwt_scns_share

 

Growth Hackers ultimate definition (by CEO, Co-Founder Jonathan Aufray):

If you are in the startup world, I am pretty sure you’ve heard about lean startup. This is a common method used by startups but it’s often misunderstood by entrepreneurs. This is why, today, I want to give you the ‘ultimate’ lean startup definition. I’ve already given you the growth hacking definition and the inbound marketing definition: now, it’s the turn to lean startup to be defined.

If a business owner wishes to create successful company and product, their key task is reducing different risks. Entrepreneurship is definitely a risky business and as such, one of the primary missions of the entrepreneurs is to systematically and gradually get rid of the risks. The key in this is that whenever developing a product, entrepreneurs focus on the largest risks first.

As what’s mentioned before, the largest risk is the newly founded companies are rarely the manufacture of the solution or product. With today’s times of cheap manufacture, entrepreneurs can be very fast to make a product with enough effort, money, and time.

The biggest risk for the entrepreneurs is that they will create a product that nobody likes to purchase. When entrepreneurs are just starting, they only have a hunch regarding the problem that potential clients face, a suitable solution as well as even the logical customer segment.

Since they’re only the hunches of entrepreneurs, creating a solution very quickly, and choosing the customer segment or the entire business model very early can lead to failure. A solid strategy, good plan, and implementation of marketing plans seem like the right strategy at first because these are the things that big companies have. However, applying such traditional tools to the newly created companies do not make sense because the latter face uncertainty.

The bigger the uncertainties are, the more difficult it is in predicting the future. That is the reason why planning can be exact when it is based on a stable, long history of the startup in a relatively stable surrounding that does not apply to newly created or established companies.

If the entrepreneurs build products that nobody would want to purchase, this makes no difference if it is made on schedule as well as with planned resources. This statement indicates the fact that the basic task of entrepreneurs is learning which product to make at all and that’s the product for which customers are prepared to pay and in short possible time. As the solution to quick and complex changes in the environment, the new method of building a new company developed known as lean startup.

Lean startup is the new look on the development of innovative products, which emphasize fast iterations of product development that is based on the new insights to the wishes of customers and including big visions or high ambitions of the business team at the same time.

In today’s economy, the question “can it be built?” is not crucial anymore for the reason that nearly any product may be created since there are sufficient means of the production are available. More important questions in modern economy are whether a particular product must be built and whether it’s possible to build long-term sustainable business model around the products.

Manufacture capacities of the developed countries are bigger and more developed compared to the knowledge of what the market really wants. With the manufacturing capacities reaching the point where you can manufacture nearly anything you can think of, the question of whether you can make new services or products are not in the foreground anymore, yet instead whether this makes sense to build this and if it’s profitable.

For every lean startup, this is necessary that they let go as soon as possible of wrong assumptions that they can describe history exactly, even more exactly plan or predict the future and co-create this. What must come to the forefront is the realization that the entrepreneur’s assumptions or the business team regarding the market, the customers and their problems are very wrong and only through trying, discovering, and measuring patterns with scientific method can these be true.

The history of the successful startups in the modern times teaches everyone that by far the most essential factor for the business success of established and new companies is a desire for verifying assumptions in the market, testing, and learning based on the small failures and looking at the problem’s right combination that brings the final huge success.

Customers are what make the product into a success story. Without customers who are ready to purchase the products, it is not essential how innovative ideas are or how affordable the product is because the company will surely fail. With this, there’s an important realization that bigger uncertainties do not do only bring challenges and disadvantages to long-term business planning. Bigger uncertainties are also chances because innovation and uncertainty go hand in hand.

Without the first, there’s no opportunity for the second. The disruptive innovations may happen in an environment where final products, marketing, value offers, prices, and sales channels are at most informed guesswork, yet more like a complete unknown.

Now that you got a quick introduction, it’s time to give you the lean startup definition…Let’s define lean startup: lean startup offers a scientific approach to managing and creating startups and acquires the desired product to the hands of the customer faster. The method of lean startup teaches you how to drive the startup, when to turn, how to steer, and when to persevere and grow businesses with optimum acceleration. This is a principled approach to a new product development.

A lot of startups start with an idea for products that they think people like. Then, they spend months or years perfecting the product without showing the product even in very rudimentary form to the potential clients. Once they fail to reach broad uptake from the customers, it’s often due to the reason that they don’t speak to prospective clients as well as determined whether or not the product was exceptional. When the customers communicate ultimately, through their indifference, that they do not care about the idea, the startups fail.

(more…)

How WeWork Became the Most Valuable Startup in NYC.

Adam Neumann is the CEO of super-hot office rental company WeWork, the most valuable startup in New York City. This year WeWork ranked third on our Silicon Alley 100 list.

WeWork, which has raised $969 million in funding at a $10 billion valuation, is the 11th most valuable startup in the world.

But Neumann, who was born in Israel and moved to the US in 2001 after serving as a navy officer in the Israeli military, had an interesting venture before he launched WeWork.

“Before I started WeWork, I owned a baby clothing company based in Dumbo, Brooklyn,” he tells Business Insider. The company, called Krawlers, sold clothes with padded knees for crawling babies. “We were working in the same building as my co-founder Miguel McKelvey, a lead architect at a small firm. At the time, I was misguided and putting my energy into all the wrong places.”

McKelvey and Neumann saw that the building they both worked in was partially vacant, and they got the idea to open a coworking space for other entrepreneurs. After a lot of convincing of their landlord, McKelvey and Neumann opened the first floor of a startup called Green Desk in 2008 — an early incarnation of the company that would eventually become WeWork. The focus of the company was sustainable coworking spaces featuring recycled furniture and electricity that came from wind power.

Green Desk quickly took off. But Neumann and McKelvey eventually sold the business to their landlord Joshua Guttman. “Within a week we realized that being green should be a part of anything we do, but community is really the future of work,” Neumann told Business Insider. The two founders knew they had a good concept. They pocketed “a few million” from selling Green Desk, according to The Real Deal, and founded and launched WeWork.

WeWork in its current iteration opened its doors to New York City entrepreneurs in April 2011. Since then, the company has expanded to cities across the country, and recently opened its doors globally too. WeWork’s coworking spaces give entrepreneurs space to work, and come equipped with amenities like free beer, stocked fridges, and Foosball tables.

In total, WeWork has 54 coworking spaces in New York, Boston, Philadelphia, Washington DC, Miami, Chicago, Austin, Berkeley, San Francisco, Los Angeles, Portland, and Seattle, with additional international locations in London and Amsterdam, along with new locations in Tel Aviv and Herzliya in Israel.

wework Soho West
WeWork’s Soho West office
WeWork

WeWork’s 30,000 clients range from startups — Business Insider uses a WeWork space out in San Francisco — to big companies like Merck and American Express. Individuals can also buy packages starting at $45 and rent a desk for a day.

WeWork has its its critics. It recently settled a dispute over its custodial services. And though WeWork became profitable as of this summer, some skeptics believe its financials may not support its valuation, suggesting it could be part of a new technology bubble. And there are basic concerns about the sustainability of its business model. WeWork, of course, is an alternative to real estate companies for freelancers and companies. And the real estate business can be risky.

One argument against WeWork goes something like this: Lots of startups make up WeWork’s client base, so if there’s a downturn in the market, and it becomes difficult for startups to raise funding, WeWork might have trouble staying profitable — its clients wouldn’t be able to pay the rent.

(more…)

So You Want To Be An Entrepreneur?

Only 10% of working Americans are entrepreneurs. It’s a surprisingly small number considering the amount of money self-help gurus make selling the myth of entrepreneurial elitism.

There is an ideology popular among business gurus that proclaims everyone who doesn’t work for themselves is a wage slave in need of entrepreneurial redemption. Many claim entrepreneurs are the “American Dream”, and unless you are self-made and in charge, you are nothing but a cog in someone else’s vastly more important wheel.

Reality is significantly different than this ideological myth. Self-employment isn’t always an option, it could very well make you miserable, broke and in a worse spot than you were when you were working. Relationships can become strained, your sense of self-worth can be reduced to nothing, and simply trying to pay your bills can be an enormous challenge.

If you ignore the falsehoods and stereotypes perpetuated by our culture and accept the fact that most people who choose this form of employment fail on a regular basis— being an entrepreneur quickly loses its sex appeal. In many cases, keeping your job, and investing your money wisely, provides a far greater chance of achieving financial freedom than risking it all on a hunch.

As children, we learn how to investigate the world around us. We learn simple deductive reasoning, the “five w’s” and the “1 H”. Many adults forget these early lessons and act on impulse or emotion rather than reason.

When it comes to changing your career, whether you are switching jobs or contemplating a radical change such as self-employment — the first question you have to honestly ask yourself is why.

Why do you want to try your hand at entrepreneurship? Are you out of work and desperate? Do you think you have an idea that nobody else has? Do you hate your cubicle at work? Are you worried about getting laid off? Do you feel like you aren’t getting the pay you deserve and think you can make more money on your own?

There is no right or wrong answer — you simply have to be completely honest with yourself. Typically people seek freedom or money. If you’ve been working for any length of time, being honest with yourself may be more difficult than you think. If it is money you seek its important to recognize that you likely will never find it — and if you do — it will likely take a long time.

I started my first business at 18. I was on my own at a young age and had nothing but a half-empty apartment. The jobs I was qualified for at the time were in glorified sweatshops full of miserable people. The reason I became an entrepreneur was survival. My resume didn’t match my skill set because of my circumstances. I couldn’t afford to go to school to become a Doctor or a Lawyer — I needed to survive — which was almost impossible earning minimum wage.

The question of where is an essential one. You can be an entrepreneur anywhere but that doesn’t mean all business ideas will work anywhere. Just like with real estate, many businesses are all about location.

I lived in one of the largest cities in North America in the 90s. The city was littered with “dot com” startups that no longer exist. I tried to get funding from Venture Capital a number of times without success. Eventually, I ended up pitching my idea to an incubator. I had written a business plan to create a mobile computer repair service, which was unheard of at the time. They liked the idea — but they didn’t think it was a good long-term bet, they invited me to join another project because they thought that computers would eventually fix themselves and my idea would be obsolete. As a teenager, I was able to pitch to a board of directors like my survival depended on it (because it did). I never ended up funding the business — but it was a minor speedbump in a city of millions. Thankfully, I turned down the offer to join one of their incubated companies, none of them made it past the dot-com crash let alone into the 21st century— ironically “Geek Squad” did.

The question of when was never an issue for me because I started so young. My apartment was wallpapered with post-it notes full of ideas. As disturbing as this was to my friends — I didn’t own a computer. I was forced to use the library system at a time when the internet was gaining traction and “normal people” were paying monthly for it. I was young, and I had nothing but a few boxes worth of belonging. It would have been a different story if I was mid-30s with a family and bills to pay.

When you work a job, you sometimes feel like a prisoner. The same can be said of being an entrepreneur. No matter what your situation is, you will have partners, customers, and suppliers that are essential to your livelihood. Being self-employed affords you some additional freedoms that other forms don’t, but it certainly does not free you from all obligations — no matter how much money you have.

When you have nothing you have nothing to lose.

When you work a job, you sometimes feel like a prisoner. The same can be said of being an entrepreneur. No matter what your situation is, you will have partners, customers, and suppliers that are essential to your livelihood. Being self-employed affords you some additional freedoms that other forms don’t, but it certainly does not free you from all obligations — no matter how much money you have.

(more…)

Combined Design Thinking, Lean Startup and Agile

What is the difference between Design Thinking, Lean Startup and Agile?

I often get asked what the difference is between those terms. “Is lean startup opposite of design thinking? oh no, maybe it is the same?” and “Ah ok.. so you mean agile?” or “I think Agile is a better word for it”. Those are some of the comments I get whenever I talk about one of terms above.

Design Thinking, Lean Startup and Agile can be combined as shown in the picture below.

  • Empathize, Define and Ideate through Design Thinking
  • Turn ideas into Business models following the lean startup
  • Build and deliver the product incrementally and faster through Agile processes.

Design thinking

Design thinking is an iterative process in which we thrive to understand the user’s pain, challenge assumptions, redefine problems, in order to create new strategies and solutions.

Opposed to “Brainstorming”, Design thinking promotes “Painstorming”, in order to fully understand the user’s pain.

The usual Design thinking phases are the following:

  • Empathize with your users
  • Define your users’ needs, their problem, and your insights
  • Ideate by challenging assumptions and creating ideas for innovative solutions
  • Prototype to start creating solutions
  • Test solutions

According to Tim Brown, CEO of IDEO: “Design thinking is a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.”

Lean Startup

“Lean startup is a methodology for developing businesses and products, which aims to shorten product development cycles and rapidly discover if a proposed business model is viable; this is achieved by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning.” — Wikipedia

Globally, 90% of startups fail (Forbes) and the number one reason is market failure: “They make products no one wants.” (Fortune).

The lean startup methodology was born in Silicon Valley in the 90s, but the use of the word “lean” has its roots to Toyota’s lean production system. Toyota’s lean manufacturing system was used to build things efficiently, yet it doesn’t tell what should be built.

Using Eric Ries words: “The Lean Startup provides a scientific approach to creating and managing startups and get a desired product to customers’ hands faster. The Lean Startup method teaches you how to drive a startup-how to steer, when to turn, and when to persevere-and grow a business with maximum acceleration. It is a principled approach to new product development.”

Agile

Agile is a way of working, based on an iterative development, incremental delivery and ongoing reassessment of a product.

As mostly used in software development, it is based on a clear idea of the product’s concept and its market.

Contrary to the idea of focusing on a set of features to be developed, agile focuses on the high value features first.

Agile is all about producing tangible, working results after each iteration. According to the 12 principles of the Agile Manifesto, “Working software is the primary measure of progress.” Deliver a rough draft, then revise based on your editor’s suggestions. Never deliver the entire piece all at once!

Why combining?

If 90% of startups fail because they produce products nobody wants, combining those methodology drastically reduce this risk of failing.

As you probably noticed, all the three methodology take the final user into account, through direct feedback. This feedback loop makes sure that no product is created without a purpose to the final user. This is clearly against the old way of planning on paper and then starting building a real product based on a list of pre-decided features.

By Nicolò Mantini in Medium Daily Digest’s Xplor8.

Secrets and Lies in a Silicon Valley Startup

How venture capitalists rushed to judgement and blind ambition can hurt the public.

The story of Theranos is the Silicon Valley equivalent of the Enron scandal replete with bold claims, high valuations, defrauding of investors and terrible corporate governance. Theranos promised to revolutionize healthcare by painlessly performing hundreds of tests on a single drop of blood.

In 2015, Theranos was a unicorn valued at $9 billion. By 2018, the company shut down and Elizabeth faced a ten-year ban from serving as an officer of a public company. Theranos serves as a cautionary tale of what can go wrong with a ‘fake it till you make it’ approach to building a company.

TOP 20 INSIGHTS

  1. At the age of ten, Elizabeth Holmes was determined to become a billionaire entrepreneur, an ambition her parents strongly encouraged. To achieve this, she dreamt of designing technology that changed the lives of people.
  2. Elizabeth dropped out of Stanford to start Theranos. The vision was to build a portable device that would painlessly perform hundreds of tests on a few drops of blood.
  3. Steve Jobs was a huge inspiration for Elizabeth who called Theranos “the iPod of healthcare.” She began to imitate Jobs in her management style and even in wearing black turtlenecks every day to work. “Like her idol Steve Jobs, she emitted a reality distortion field that forced people to momentarily suspend disbelief.”
  4. Avie Tevanian, a board member, grew suspicious about Theranos. Revenue projections never materialized, documents for deals with pharma giants were not shown and there were consistent product delays. When Avie raised this with the board, Theranos threatened him with lawsuits and forced him to quit.
  5. When the board again received similar complaints, Elizabeth was asked to step down. However, she managed to win the board back, a difficult feat even for seasoned CEO’s. “When you strike at the king, you must kill him.” In this case, the queen survived and the complainant was fired next week.
  6. Toxic Culture: Elizabeth indulged in nepotism by hiring her romantic partner Sunny Balwani as the Executive Vice Chairman, a vaguely defined role with sweeping powers. The Board was not informed about their relationship and the vast scope of Sunny’s role. Elizabeth also hired her brother Christian and his friends, none of whom had any relevant background.
  7. Toxic Culture: Theranos blocked online communication and spied on employee conversations and social media posts. Sunny used a fear and intimidation-based approach harassing employees he disliked. Employees suspected of not being ‘loyal enough’ were fired on some pretense.
  8. Red Flag: Elizabeth managed to convince Pfizer to use Theranos devices in a patient trial. However, the collaboration soon came to an end as the devices had frequent mechanical failures, wireless transmission errors and poor temperature tolerance. There were issues with test results as well.
  9. Turning Point: Theranos landed mega-deals with Walgreens, a massive pharmacy store chain and Safeway, one of America’s largest supermarket chains. Both companies bet big on this collaboration. However, the partnership was marked by Theranos missing deadline after deadline.
  10. Red Flag: Theranos promised its devices could perform 192 different tests while they could barely do a dozen. To meet the Walgreens deadline, Theranos hacked commercially available blood testing devices and used them for testing. The test results had dangerously high error rates.
  11. Turning point: Theranos’s stellar board, the Walgreens and Safeway deals, a potential defense contract and highly inflated revenue projections raised investor expectations. A new fundraising round made Theranos a unicorn, valued at an astonishing $9 billion. Elizabeth, now worth $5 billion, became Silicon Valley royalty.
  12. John Carreyrou, Wall Street Journal journalist and the book’s author, discovered that Theranos’s performed its tests on hacked commercial machines. Doctors shared horror stories of faulty test results creating health scares and needless suffering for many patients. “The way Theranos is operating is like trying to build a bus while you’re driving the bus. Someone is going to get killed.”
  13. Theranos tried to scuttle John’s investigation by sending legal notices and threatening emails to his sources and Wall Street Journal. Elizabeth convinced Rupert Murdoch, the owner of Wall Street Journal, to invest $125 million in Theranos. Using this, she tried to get him to kill John’s story, but Murdoch refused.
  14. John wanted to publish quickly. But the paper’s editor advised patience. He likened investigative journalism to la mattanza, a Sicilian ritual where fishermen with spears would stand in the water for hours. When the fish grew comfortable and carelessly swam close, they would swiftly go for the kill.
  15. Turning Point: The Wall Street Journal carried John’s articles exposing how Theranos ran tests on hacked devices. Subsequent pieces revealed that Walgreens and Safeway had terminated their partnership with Theranos. Throughout all this, Elizabeth played the wronged visionary, claiming false allegations were the price she had to pay for being a pioneer.
  16. An investigation by Centers for Medicare & Medicaid Services (CMS) confirmed that Theranos used hacked devices and test results were highly unreliable. Theranos was forced to void over a million test results paying $4.65 million in reimbursements. What is unimaginable, however, is the damage that could have been caused had Theranos rolled out nationwide.
  17. Investors sued Theranos, Elizabeth and Sunny for deceit. Walgreens filed a lawsuit for violation of basic quality standards and legal requirements. The Securities Exchange Commission charged Theranos with fraud and barred Elizabeth from holding office in public companies for ten years. She was forced to give up voting control and most of her shares in Theranos.
  18. Red Flag: “Hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry.” However, in healthcare the costs were far higher. Millions of lives were at risk as treatment decisions are made based on lab results.
  19. Culture Alert: Elizabeth knew exactly what she was doing and systematically manipulated people. Her ambition would not admit setbacks. She made disastrous decisions that cost Theranos, the investors and the general public dearly.
  20. The story of Theranos is a cautionary tale. Watch out for similar warning signs in your organization and the companies you work with. Your career or business might be at stake.

(more…)

What Traits Entrepreneurs Need to Succeed

 

Launching a startup and building it is fraught with unforeseen risks. It calls for passion and commitment that extend beyond business goals, according to participants in a panel discussion at the Wharton India Economic Forumheld recently in Philadelphia. Four startup founders spoke about how they began their entrepreneurial journeys, found the right partners, went about raising capital and scaled their businesses. They shared stories of struggles to keep their ventures afloat when failure seemed imminent; battles against gender bias; and threats to work-life balance.

Cisco chairman emeritus John Chambers noted in a recent Knowledge@Wharton interview that more than 70% of all startups fail. Sometimes, when death seems near, survival might well be within reach if the startup team is enthusiastically involved. That is a lesson that a near-death experience at his startup taught Gautam Tambay, co-founder and CEO of Springboard, a three-year-old firm that provides online education courses in “new economy” skills such as data analytics and AI/machine learning. A couple of years after its founding, Springboard faced a crisis. Tambay and his team realized that though they had a good product and decent user reviews, usage was dropping, revenues were flat or declining, and they had only enough money to survive three months. They determined that their distribution model was flawed, and the only way out of the crisis was to raise more capital. If they failed to do so, Springboard would have to close.

That was when the 20-person team — which was “young and hungry” — took Tambay and his co-founder, Parul Gupta, out to lunch. They said, “We’ve seen the numbers. They are not good, and you must be stressed. Why aren’t you involving us?” Tambay said he was afraid that sharing the firm’s troubles might have led the team to quit. The team members reassured the founders that “they wanted to be part of the story,” which is why they chose to work for a startup like Springboard and not for a big company. “That was one of the biggest lessons, [although] it was counter-intuitive to me at the time,” Tambay said. A more involved team then worked together to revive the firm’s fortunes, he added. He changed his approach from one of being “the umbrella to protect everybody from bad news” to one where “you let the bad news flow as soon as possible, so you get more people working on the problem.” With offices in San Francisco and Bangalore, Springboard has grown since that frightening experience. It has now trained more than 200,000 students in 77 countries.

Deciding to take the plunge into entrepreneurship and giving up the security of a regular paycheck is the first big challenge startup founders face. Before she began her entrepreneurial journey, Krishnan had worked in business and product development roles at large companies including Microsoft and Comcast, as a venture capital investor, and as an executive at venture-backed startups. “I had seen it being close to the founder, but not being the founder,” she said. For Krishnan, the prime driver was her passion to make an impact in the education space by using technology “to make learning more fun and engaging.” According to her, startup founders must ask themselves if they would pursue their venture even if they knew that they wouldn’t make “significant amounts of money. If that drives you, you will fight all the fights along the way to get to the end point,” she said.

Singhal’s entrepreneurial journey began in 1999 when he was a student at the Indian Institute of Technology in Kanpur where he won a business plan competition. He pursued his idea for seven years with little success before launching InMobi. “There’s no entrepreneurial gene in my family remotely,” he said, citing his middle-class upbringing; his father was a bank executive and his mother a homemaker.

“I had zero risk. The only risk was – what would my parents think about it? But that was manageable.” The security of a job could be compelling, he noted. “For all of us who think entrepreneurs are these geeky, rich people, the risk-adjusted probability return of a working professional is more than that of an entrepreneur.”

When Tambay had to choose between a career as a software engineer or becoming an entrepreneur, he followed a piece of advice someone had given him: “Find a person who is 10 or 15 years ahead of you or older than you and whose life you want – and then do what they did,” he said. That exercise didn’t take long: his models happened to be entrepreneurs. “I jumped right into it. I didn’t overthink it. If you want to be an entrepreneur, don’t overthink it.”

(more…)

The Best (Entrepreneurship) Books of 2018

This incredibly thought-provoking book describes the negative impact that social media and overparenting are having on today’s youth. It made me reflect on my own actions, as both a CEO and a parent, and what ways I’ve contributed to today’s “safetyism” culture. Its core message has stayed with me—and has led me to develop new ways to drive innovation and smart risk-taking at the office, while also helping me to encourage independence and resilience with my children at home.

Technology has already infiltrated every human interaction, but 2018 may be remembered as the year we truly started to grapple with the consequences. So perhaps it’s no surprise that when Bloomberg asked dozens of business leaders to name the best book they read this year, The Coddling of the American Mind, by Greg Lukianoff and Jonathan Haidt, received the most votes.

Also garnering several votes was John Carreyrou’s Bad Blood, the deep dive into the rise and fall of blood testing startup Theranos. PayPal’s Dan Schulman and Andreessen Horowitz’s Katie Haun both said this was their favorite book of 2018. Haun, who used to work as a Justice Department prosecutor (though not directly on Theranos), said it was fascinating to hear the other side of the story.

Practically overnight, Theranos went from being a $9 billion unicorn to losing it all. It’s a cautionary tale on what can happen when a captivating narrative distracts from business fundamentals—and the perils of squelching dissent at all costs. Carreyrou’s work also underscores the importance of investigative journalism, without which this story may well have never been told.Practically overnight, Theranos went from being a $9 billion unicorn to losing it all. It’s a cautionary tale on what can happen when a captivating narrative distracts from business fundamentals—and the perils of squelching dissent at all costs. Carreyrou’s work also underscores the importance of investigative journalism, without which this story may well have never been told.

Well-known technology executive and angel investor Elad Gil has worked with high growth tech companies like Airbnb, Twitter, Google, Instacart, Coinbase, Stripe, and Square as they’ve grown from small companies into global brands. Across all of these break-out companies, a set of common patterns has evolved into a repeatable playbook that Gil has codified in  Well-known technology executive and angel investor Elad Gil has worked with high growth tech companies like Airbnb, Twitter, Google, Instacart, Coinbase, Stripe, and Square as they’ve grown from small companies into global brands. Across all of these break-out companies, a set of common patterns has evolved into a repeatable playbook that Gil has codified in High Growth Handbook.

Inspired: How to Create Tech Products Customers Loveis a look at how successful technology companies such as Google, Tesla, and Netflix design, develop, and deploy attention-grabbing products. Discussions in this book focus on structuring staff and discovering/delivering technology products your customers will love. The client-centered approach mirrors what we do at Schwab; the emphasis on how successful teams work when the client is at the center echoes what we are undertaking within Schwab’s Digital Services team.

How do today’s most successful tech companies—Amazon, Google, Facebook, Netflix, Tesla—design, develop, and deploy the products that have earned the love of literally billions of people around the world? Perhaps surprisingly, they do it very differently than the vast majority of tech companies. In INSPIRED, technology product management thought leader Marty Cagan provides readers with a master class in how to structure and staff a vibrant and successful product organization, and how to discover and deliver technology products that your customers will love—and that will work for your business.

With sections on assembling the right people and skillsets, discovering the right product, embracing an effective yet lightweight process, and creating a strong product culture, readers can take the information they learn and immediately leverage it within their own organizations—dramatically improving their own product efforts.

Whether you’re an early stage startup working to get to product/market fit, or a growth-stage company working to scale your product organization, or a large, long-established company trying to regain your ability to consistently deliver new value for your customers, INSPIRED will take you and your product organization to a new level of customer engagement, consistent innovation, and business success.

Filled with the author’s own personal stories—and profiles of some of today’s most-successful product managers and technology-powered product companies, including Adobe, Apple, BBC, Google, Microsoft, and Netflix—INSPIRED will show you how to turn up the dial of your own product efforts, creating technology products your customers love.

Entrepreneurship may seem risky, but many young people should consider taking that path 

Tom Simpson

Young adults are generally advised by their parents and teachers to pursue traditional career paths in various professions or trades. Schools provide the essential skills in reading, writing and math, while teachers and parents provide guidance with regard to job opportunities. The intent is to obtain the necessary education to pursue a specific field, get hired and attain success.

This template works well for many and is ideal for those who have a reasonably clear idea of what they want to do and are passionate about it. It does not work well, however, for those who are unsure about their career aspirations, don’t want to settle on one path or tend to think out-of-the box.

Josh Neblett, my co-founder at etailz, was a student of mine at Gonzaga in a class titled “Creating New Ventures.” The class exposed him, for the first time, to entrepreneurship and the key elements of starting and growing a company. Up until then, he was planning on joining his father after graduation as a financial consultant. He was so taken by the allure of being an entrepreneur that he instead leapt at the chance to take an idea I had presented to class and form a company. He’s never looked back.

I’ve often wondered what Josh’s career would have been like had he not taken my class. I also feel regret for other would-be entrepreneurs that were never exposed to the world of startups and did not realize that taking an idea, starting a company, forming a team and growing a business was well within their reach.

Most universities and colleges now offer programs in entrepreneurship. Yet I think college is too late. First, it excludes the young people who chose not to pursue education after high school. Secondly, the prospect of grooming innovators during their formative middle school and high school years is missed.

I regularly coach my students to start a company, or join a startup — if they are unclear about what they want to do when the “grow up.” My advice is generally not embraced by parents. Startups are viewed as risky, with little to no chance of meaningful success. Josh’s parents, for example, only endorsed his decision to start etailz if he agreed to simultaneously purse his MBA.

I believe starting or joining a new company is precisely what those who are not pursuing a standard career trajectory should do after college (or high school). My rationale includes:

BROAD EXPOSURE. Because employees of successful startups are required to be a “jack of all trades,” new ventures provide exposure to all functional areas — marketing, sales, development, operations, accounting, etc.

IMMEDIATE EXPERIENCE. Employees of early stage companies are afforded more responsibility and far greater authority to make decisions than counterparts in more mature businesses.

RAPID ASCENSION. As an early employee of a new venture, the potential for multiple promotions as the company grows is significant.

JOB SATISFACTION. Working in a startup can be very fulfilling as the fruits of one’s labor are quickly measurable. This is particularly true for those who are self-motivated, can succeed despite vague job descriptions, are able to juggle multiple tasks and are team players.

BUILD EQUITY. Early employees of startups have the opportunity to generate meaningful capital if the businesses is sold or goes public.

MINIMAL DOWNSIDE. Individuals fresh out of high school or college typically don’t have families to support and mortgages to pay — and if the venture is a failure they have plenty of time to pursue something new. And there is no stigma associated with entrepreneurial failure.

Longer term, entrepreneurs are afforded more flexible work schedules in terms of work hours and vacation time. In addition, they are only beholden to themselves — not to a specific industry, employer or company. This sense of freedom is the ultimate luxury.

Accordingly, I advocate for dedicated high school curriculums on the topic of entrepreneurship. The first objective is to introduce the notion of starting and running a company vs. going to work for someone else — and the lifestyle pros and cons of each. This alone, I suspect, would inspire many young people to consider becoming an entrepreneur and adds credibility to this career alternative.

The second objective is to teach the specific skills required to vet a new product or service, evaluate a market, establish profitable pricing, hiring and managing teams, raising capital, establishing budgets and monitoring performance.

Keep in mind entrepreneurial dreams come in many different flavors. Some aspire to form the next FAANG company, others desire to establish a clothing brand, socially responsible not-for-profit, a juice bar, etc. Neither objective is better than the other. They are equally fulfilling and valuable to the economy.

A curriculum along these lines in high schools would produce positive, long-term economic benefits. More innovative companies will be formed and entrepreneurs will be better prepared. ♦

Courtesy of America’s Best Read Urban Weekly, The Inlander by Tom Simpson