Posted April 10th, 2013 by Nathan Furr with Comments Off
Energize 2013 Regional Summit
Date: April 11-12
Stakeholders from across the sustainable energy ecosystem are attending Energize 2013 this Thursday and Friday — from budding entrepreneurs to venture capitalists, academic researchers to industry stakeholders. Don’t miss out on this opportunity to network, collaborate, and learn from this growing regional community! See below for a list of speakers including NISI author Paul Ahlstrom.
Posted April 1st, 2013 by Nathan Furr with Comments Off
Are you more likely to be killed by a shark or by a bee sting? Most people imagine the waters of the coast of Australia or San Diego and answer “shark attack.” However, as strange as it may sound, the reality is that you are more likely to be killed by a bee sting or even a box jellyfish, which kills more people than sharks and crocodiles combined. But why do we answer so confidently that we are more likely to be killed by a shark? The answer is that we are more familiar with stories of people being killed by shark attacks. It is this familiarity that causes the trouble in our perception of the odds and also causes trouble when we are learning.
Familiarity and Capability Traps
Both individuals and organizations tend to lean on either the familiar or on their strengths—their competencies. In organization studies this has been called a capability trap, and many organizations have stumbled and fallen because they stuck with their strengths. Consider the case of typesetter manufacturers, as told by Professor Mary Tripsas. In the early part of the 20th century, typesetters were based on a system of injecting hot metal into a type mold. The type would then be inked and used to print the pages of a book. Eventually, with the evolution of photography, a new method of typesetting emerged—phototypesetting. Phototypesetting could use a photographic image of fonts, rather than hot metal, to create the printing layout. Although the differences between hot-metal technology and photography seem clear to outsiders, the dominant manufacturers in hot-metal typesetting struggled for years to develop new photo typesetters. In fact, initially, they designed their new lines of photo typesetters on the old, hot-metal architecture and tried to incorporate elements of the hot-metal process into the phototypesetting. The results were ugly, and these manufacturers struggled until they eventually switched to the new architecture. Similarly, the top executives at Polaroid let what was familiar overshadow a valuable new asset, killing the digital photography initiative and the company.
Entrepreneur Competency Traps
For entrepreneurs, the familiarity or competency traps can be a problem because entrepreneurs tend to reuse ideas they understand in settings where they may no longer be appropriate. Many startups I have studied rely on familiar strengths and habitual ways of doing things. For example, Eric Ries tells the story of working for a startup that brought in a professional CEO with a background in marketing. The new CEO naturally also brought his familiarities and strengths to the table. In this case, the CEO viewed the world through the lens of the “go big” marketing blitz strategy. In the case of a new technology in a new market attempting to launch in a post dot-com crash environment, this was a very poor strategy. But it was the familiar strategy. Following the familiar strategy, the company carefully perfected its product and then launched it with a massive marketing blitz that generated a meager handful of users and a few thousand dollars in revenue. Ultimately it was sold for pennies on the dollar. The lesson: one of the most challenging things entrepreneurs must struggle with is discovering what they don’t know or don’t have. Entrepreneurs have to possess a unique brand of humility to recognize these weaknesses or blind spots and find others who can fill them in.
Find and Fill Your Missing Competencies
When I worked for one of the major strategy consulting firms, we created a new business based on the idea that top CEOs need help finding ways to see what they are not seeing. This new business provided these CEOs with sounding boards from outside their company and outside their industry which could help them recognize what they might not see. Similarly, entrepreneurs need to first recognize they cannot do it all and then begin doing two things. First, network with people different than you. Take them to lunch and ask lots of questions to see what they know that you may not know. Second, surround yourself with people who have different capabilities than you do. Research on hiring suggests that we tend to hire people we know and people who are like us—the two are highly correlated. Instead, focus on hiring people who have skills you are missing. It could help you survive.
Posted February 20th, 2013 by Nathan Furr with No Comments
20th Annual Deal Stream Summit
Where: Albuquerque, New Mexico
When: April 4, 2013
What: NISI Book Principles
Paul Ahlstrom, Managing Director and Co-founder of Alta Ventures Mexico, to give address at upcoming Deal Stream Summit.Mr. Ahlstrom is an entrepreneur, author and investor, focusing most of his career on the early stage startup process. Co-author of the book “Nail It Then Scale It,” he has founded multiple high-technology startup companies and investment funds in the U.S. and Mexico. His current focus is opening up capital sources to Mexican and Latin American entrepreneurs and supporting their vibrant entrepreneurial ecosystem.
Following Paul Ahlstrom’s keynote address is “The Role of DOE—Novel Approaches to Tech Transfer” led by Roger Werne, Deputy Director, Industrial Partnership Office, Lawrence Livermore National Laboratory.
Karina Edmonds, Ph.D., Technology Transfer Coordinator, US Department of Energy
Peter Tseronis, Chief Technology Officer, Department of Energy
20th Annual Deal Stream Summit
Ideas – Talent – Capital – Community—these are the themes driving our 20th annual Deal Stream Summit to be held April 2-4, 2013 at the Hyatt Tamaya Resort in Albuquerque. With nearly 300 investors and partners in attendance, our 20th Deal Stream Summit this year will feature promising, high-tech business opportunities. Additionally, we will spotlight investment approaches and funding models critical to early-stage startups.
Enjoy the world class Hyatt Tamaya Resort
The Hyatt Regency Tamaya Resort & Spa is situated between Santa Fe and Albuquerque at the base of the Sandia Mountains.
Hyatt Regency Tamaya Resort and Spa
1300 Tuyuna Trail, Santa Ana Pueblo, NM
Junior Suite $325.00/night
View the latest speakers, agenda and register today at http://www.dealstreamsummit.com
Posted January 16th, 2013 by Nathan Furr with No Comments
Paul Ahlstrom was a participating speaker the Startup Grind 2013 February 5th session in Silicon Valley. He spoke on “The State of the Incubator Market.” Watch the video on YouTube.
Tuesday, February 5, 2013
@ 7:00 AM – Wednesday, February 6, 2013 @ 5:00 PM
Computer History Museum
1401 North Shoreline Boulevard
Mountain View,CA 94043
Startup Grind is an event series and website designed to help educate, inspire, and connect local entrepreneurs. Each month they welcome an amazing speaker who shares their story with our community and tells us what worked, what didn’t, and what they’ll do differently next time. It’s an amazing opportunity to learn from the best, network with other members of the startup community, and improve your chances of entrepreneurial success.
Here’s the agenda for this two-day set of sessions:
Posted December 4th, 2012 by Nathan Furr with No Comments
In this blog I have argued that there is a new entrepreneurial model that replaces the old, planning-first, building-first model that we used to teach. If I had to summarize this new model and the secret to entrepreneurial success in one sentence it would be the following:
1) Recognize your idea is a guess about how to satisfy customers and 2) inexpensively and quickly test that guess with customers before building products or scaling the business.
At the core, to succeed as an entrepreneur or an intrapreneur (inside a corporation), you must test your guesses and iterate your way to success. This is the heart of the new entrepreneur and the science of how the new science of entrepreneurial management. Of course there are more details which I have written about here and here as well as in my book, Nail It then Scale It.
Mastering the Secrets of Serial Entrepreneurs
In brief, I argue that entrepreneurs have to first find the right problem (nail the pain), then iteratively reach a solution using a series of virtual prototypes (nail the solution), while also discovering the unique way in which they can communicate with their customers (nail the go-to-market strategy). Once you get these steps right, you can focus on optimizing the business model and eventually scaling the business but only then.
Where Do Entrepreneurs Fall Down?
As part of my work with hundreds of entrepreneurs and my research (including my research on the Lean Startup with Eric Ries), I want to share with you the traps that have caught the entrepreneurs I teach, mentor, or research. Why? Because often understanding what does NOT work helps us better understand what DOES work. Every week or so, I will post a new trap that I have observed in my research with details on how to overcome it.
What Will We Cover?
I will cover traps as they relate to the following key areas:
Originally posted on 9/4/2012 by Nathan Furr on the Forbes blog
Posted September 6th, 2012 by Nathan Furr with No Comments
The success rate for startups is pretty lousy — much worse than Paul Ahlstrom thought was acceptable.
Ahlstrom, a seasoned entrepreneur and investor who will give the keynote address at next week’s Great Plains Capital Conference, said frustration about this observation is what led him to write “Nail It Then Scale It” with entrepreneurship professor Nathan Furr.
“I noticed that we as entrepreneurs were not beating pure luck in getting it right, getting a business off the ground,” he says.
But there were exceptions — people who had a “habit of success,” who consistently got it right. Ahlstrom and Furr’s book is based partly on interviews with these people. He says he plans to share some of the insights during his presentation at the Sept. 13 conference in Wichita, where 13 businesses will make pitches to about 75 angel investors.
Ahlstrom says many entrepreneurs do all the right things, but often, those who fail have done them in the wrong order or with the wrong intensity. A couple of common mistakes:
• An entrepreneur has a great idea and just goes for it. Ahlstrom says successful startups tend to be those where a “monetizable pain” intersects with something the founder is really good at. He says the entrepreneur should consider what he’s good at and look for market needs within that realm. How do you know if the idea targets a true monetizable pain? Consider whether the pain is so significant that a potential customer would return a cold call about it.
• A startup seeks capital too soon. Ahlstrom says that once a business has investors, it becomes much more tied to the success of the idea. What’s lost is the ability to listen to potential customers, who might be able to improve the product if only the founder would take their input into account. “With too much money before you have validated that value proposition, you have a dramatically higher probability of failure,” he says. “Once you’ve nailed it, that’s the appropriate time to raise more money, to pour on the fuel.”
The Wichita-based presenters at the Great Plains Capital Conference are DigiPath, Elevated Health Systems and Ulterius Technologies.
Posted August 18th, 2012 by Nathan Furr with No Comments
NISI Publishing would like to congratulate Robb Kunz and John Richards on a successful and exciting BoomStartup Demo Day. Way to go, Class of 2012! See the list of participating BoomStartup companies for 2012
John Richards and Paul Ahlstrom gave out five copies of Nail It Then Scale it to participants of the 2012 BoomStartup Demo Day.
About Boom Startup:
BoomStartup helps entrepreneurs with technology ideas develop an optimal business model then create a minimally viable product that is revenue-ready that they can then execute into a revenue generating company. Then BoomStartup mentors help make connections to customers and investors with the goal hat the companies at the end of the summer program will be ready for investment from angel investors and venture capitalists.
Posted May 5th, 2012 by Nathan Furr with No Comments
The Startup Book That Shows Entrepreneurs What it Takes to be Successful
Read the startup business model book Nail It Then Scale It by authors Paul Ahlstrom and Nathan Furr. They outline the process used to transform new ventures from struggling startups to outperform all their competitors combined, beat sales forecasts in the first quarter of a recession, and transform a broken sales process into a 100% close rate.
In the startup book Nail It Then Scale It you will learn why most new businesses fail and why a few entrepreneurs have a habit of winning over and over again.
Most startups fail by doing the “right things,” but doing them out of order. In other words, human nature combined with the traditional startup process can lead to a 90% failure rate.
But the time from company creation to revenue can be shortened. Personal investment and investment capital can be minimized. There is a consistently effective way that leads to entrepreneurial success.
Nail It Then Scale It will step you through six timeless principles and five key practices used by innovators like Thomas Edison and Steve Jobs, to repeatedly innovate. This handbook guides entrepreneurs and innovative product managers to victory by doing the “right things” in the right order.
The world of entrepreneurship is changing. Join the few entrepreneurs that can consistently take their innovative idea all the way to a successful company launch.
Learn more about innovation in this startup book, read the New Entrepreneurial Paradigm Nail It Then Scale It.
Author: Nathan Furr
Posted May 5th, 2012 by Nathan Furr with No Comments
In a recent post, I talked about how pivoting can kill you. Pivoting is a popular term for a fundamental entrepreneurial process—it describes how entrepreneurs change quickly when they find out they are wrong. The point of the post was that while pivoting is a fundamental part of your search for an opportunity, sometimes entrepreneurs make so many tiny pivots that they forget the big changes that could lead to a bigger opportunity. This post is part of a series on basic processes followed by the “new entrepreneur” and the hidden traps that sometimes snare entrepreneurs. Let’s continue the theme. First I’ll share the basics of the new entrepreneur. Then I’ll share the trap I see entrepreneurs fall into.
The Basics of Testing Your Ideas
As an entrepreneur, you have to start by recognizing that whatever you believe is just a guess. Not the actual facts. If you had the facts, you could move forward with more confidence and radically increase your chances of success. So let’s start by turning your guesses into facts. How do you do this? Identify your guess (let’s call it a hypothesis) and design a simple, inexpensive, rapid test to see if your guess has any merit. How do entrepreneurs in the field do this? Develop a virtual prototype and test it with customers. For example, software entrepreneurs create a “mock-up” of the software on paper or in PowerPoint. Product entrepreneurs create a “mock-up” out of clay, plastic, or parts from Home Depot. If you are really early in the process, don’t even waste your time with a prototype, just start talking to customers.
How to Save Yourself $100,000 or More
Unless you have been in the industry you are targeting for 15-20 years, I guarantee you will find out two things. First, that your guess was wrong. Second, after you find out that you are wrong you will discover how you could change and turn your guess into something customers will want. In other words, you will find out that despite your utter confidence in your idea, it was just a guess, but now you have some facts you can act on! Finding this out early can save you $100,000 or more. Finding it out late can cost you success.
While this process sounds simple and works astounding well. There are two fundamental fears that stop entrepreneurs from actually following the basics. First, finding out you are wrong. It is hard, very hard, to have the courage to get in front of customers and find out you are wrong. But unless you never plan to launch your business, you will have to do it one day. You can either do it now or later but waiting till later will kill your chances of success. Second, entrepreneurs are scared their crappy products and ideas will ruin their chances to win customers. In fact this fear has some grounding in reality. It would ruin your chance if you are going after the entire customer base at once. Herein lays the trap.
The Hidden Trap: Going After too Many Customers
Entrepreneurs are driven, almost by nature, to go after as many customers as possible, as soon as possible. But when you are testing your ideas, you have to remember it is a TEST. You don’t test your ideas on the whole world, you choose a small sample, learn from the test, make changes, and test again. Even after teaching students for a whole semester, and emphasizing that you test your ideas on a small group, I still have students say things like “test your ideas with as many customers as possible.” Nope. Test your ideas with a sample of customers, pivot, then retest, until you have the facts. Don’t go after too many customers at once.
Originally posted on 4/26/2012 by Nathan Furr on the Forbes blog
Posted April 12th, 2012 by Nathan Furr with No Comments
What is the difference between the old and the new entrepreneur? I’ve started teaching again and in presenting to the class drew up a quick slide that highlights the key difference. At the core, the idea is that when you are dealing with unknown problems (in contrast to known problems), you have to test your assumptions in as low-cost a manner as possible and then iterate when you inevitably find out that you were wrong. The difference really comes down to the difference between a planning-based model and a learning-based model where you employ all the tactics you can to learn as honestly and flexibly about the unknown. It sounds simple but it can be difficult to break free of the old wisdom in practice.
How Launching Your Business Differs
Let me provide an example of what the new entrepreneur means in practice. In the old model of entrepreneurship, if you have an idea, the next step is to write a business plan, then build your product, perfect that product, and finally launch with a big marketing push through the most well respected channels (usually through print or other media which ends up being quite expensive). Of course the fundamental problem is that once you launch, most often you find out that very few people buy your product. Why? Because you executed beautifully on a guess about what customers actually want but most often such guesses turn out to be wrong. In contrast, the new entrepreneur has the intellectual honesty to recognize a guess for what it is and then find the shortest and least expensive way to conduct a real test of that guess. So let’s apply this to a real business: Dropbox.
Dropbox as an Example
Dropbox has received a great deal of attention for going up against over eighty other competitors in the online storage space and winning. Dropbox had more reasons than most businesses to follow the traditional model of building and then perfecting your product: if Dropbox had launched a crappy product and screwed up their users’ critical files, those users would have been exceptionally angry. Traditional wisdom would suggest delaying launch until you have the product right and then winning as many customers as possible. By contrast, when I talk about the new entrepreneur approach, I argue that you only learn at the end of your development cycle, so launch small and early so that you can learn because failing to learn will kill your business. Why? You’ll waste precious time and resources building something that no one wants.
Don’t Mix Old and New Logic
Fortunately, Dropbox decided that they needed to launch early to learn about their customers. But here’s the rub. When I work with entrepreneurs and emphasize launching with a bare-bones product to learn what customers really want, they almost always think it means that they should try to get as many customers as early as possible. But take a closer look—getting as many customers as fast as possible is the logic of the old model and it leads to premature scaling and death. Instead, find a small sample of representative customers and try out your product or service with them. If you totally screw up, it really won’t matter in the end because the group is so small and most likely those customers are forgiving early adopters anyway. But you will learn lessons crucial to your survival.
How Dropbox Discovered their Critical Edge
That’s exactly what Dropbox did to discover their critical edge. Dropbox’s founder, Drew Houston, created a short video himself (for free) and posted it on Hacker News (headquarters of early tech adopters) and held a small private alpha test. What did he discover? When he started the business, Houston had been convinced that what customers valued was the actual storage space for their files but his tests helped him realize something fundamental: it wasn’t the storage space that was driving use—it was the simplicity of the interface. What users really valued, what they were even willing to pay for was a solution that in Houston’s words “just works.” That one competitive insight is the key to Dropbox winning out over eighty other competitors and the future of their success. But they wouldn’t have learned it following the old model, even when everything seemed to justify following the old model and launching late. In closing, think of launching small and early like an experiment—you select a sample, you test, you learn, and you iterate.
Posted March 20th, 2012 by Nathan Furr with No Comments
They may not know it, but business plans have caused a lot of grief for entrepreneurs. Most new entrepreneurs believe their first step is to write a business plan and then their second step is to follow the plan. But the whole time they are wasting precious time while meanwhile most likely following their “plan” down the path to failure. To make matters worse, at universities we have reinforced this behavior by teaching business plans first, even though there is no solid academic evidence that business plans matter for success. So I say, burn your business plan. There is a far better way that is proving to dramatically increase success—and that is to start by validating your assumptions in the field, with customers.
Understanding the Difference Between Plan and Process
Now let’s be careful, I’m not saying business plans have no place in the universe, but I am saying they are a bad place to start. There is a much better process to follow and when you are done then, and only then, should you write a business plan. Until then, let’s get clear, rather than doing a business plan you should focus on a business model process. The key difference is quite simple: in a business plan you are trying to plan, inside the building, the optimal solution that you can go execute on. In a business model process you recognize that everything you know is a guess that has to be tested, outside the building, with the goal of learning.
The International Business Model Competition
To help teach this process, just this past month Steve Blank and Alex Osterwalder joined me at the International Business Model Competition which we created. We rewarded students for the process rather than the plan and the results were astounding. Check out the winner, XoomPark.
As they presented folks were saying “can we invest right now?” and unlike many business plan competition winners that fizzle out over the hype passes, these guys have already validated their ideas in the market—they will succeed.
Join the Business Model Competition
Next year we plan on holding the competition at Harvard and at Stanford the year after. Come join us. While the competition is open to students, you could come see what it is all about or if you are at a university, come submit or create your own competition. Let me know. We are changing the world and burning business plans, one competition at a time. There is a better way.
Originally posted on 2/24/2012 by Nathan Furr on the Forbes blog
Posted March 13th, 2012 by Nathan Furr with No Comments
Nail It then Scale It does a great job synthesizing the current thinking around disruptive innovations and entrepreneurship and channeling it into an actionable set of frameworks and processes. Both the recommended actions and there sequence seem very practical to me, and I think this should serve as a great tool for start-up teams. Congratulations.
Geoffrey Moore, Author of Crossing the Chasm, Escape Velocity and Inside the Tornado
Posted March 11th, 2012 by Nathan Furr with No Comments
Nail it, then scale it. Echoing the words of Paul Ahlstrom, the author of Nail It, Then Scale It, don’t grow before you’re ready; get your business model and infrastructure in place first. Many entrepreneurs are too focused on their own vision to listen to the friends and first customers who can truly help mold the product or service into perfection. That said, if you work diligently and intently on the model itself, building it with scalability in mind, the sky’s the limit—once you’re ready to grow. Think big, but focus small until you’ve proven that the model works, and can carry out the big vision. – Dave Kerpen, CEO Likeable Media
Full story at Best Advice I Ever Got: Dave Kerpen
Posted March 8th, 2012 by Nathan Furr with No Comments
Kisstixx Entrepreneurs Had Great Success on Shark Tank Show Because They Knew How to Start a Business
Read the book that launched Kisstixx to their success: Nail It Then Scale It.
Listen to the Kisstixx Broadcast: Speaking on Business broadcast by Chris Redgrave on Kisstixx – Download MP3
Author Paul Ahlstrom and a UVU Entrepreneur class discuss the advantages of the entrepreneur TV show Shark Tank for Dallas Robinson & Mike Buonomo the two entrepreneurs who launched Kisstixx, a new lip balm, by accepting Mark Cuban’s offer of $200K on in exchange for 40% of their company. Watch the Kisstixx episode
Here are some of benefits to Kisstixx for the Cuban alliance as discussed:
• Rock Star- Kisstixx gets a mega star to promote their stuff
• Doors open – Doors that were closed will now open with Cuban’s endorsement
• Counsel – Cuban is a terrific businessman. Dallas says he is very involved now with Kisstixx, one on one
• Inventory – Kisstixx will now get some big orders, exponentially larger than previously entertained. That means inventory and I thought I heard Cuban say he will finance it as part of his skin the game. That’s huge!
• Time – This may be the biggest of all. There are some 800 pound guerrillas doing lip balm. Kisstixx has chosen to protect their stuff using “trade secret” rather than “patent.” This means they have to be fast to dominate. Especially if they are the next “pet rock,” as Paul states, not having seen the deep bench of follow on Kisstixx products, then time is precious. Cuban gets them on the shelf fast. It’s a fast way to scale a startup business.
Advice for Entrepreneurs
When looking to launch an company like Kisstixx entrepreneurs should first learn how to launch a lean startup by building alliances or joining an incubator group like CEDO where they can get quick honest feedback. The startup book Nail It Then Scale It teaches entrepreneurs how to seek and receive feedback as they begin their quest for knowledge and the needs of their market. Friends and family will always tell you they love your idea but gather facts and data on your idea to avoid relying on beliefs and gut feelings. Conduct rapid, inexpensive, simple experiments to test your ideas in the market, rather than building a full blown product.
Posted February 16th, 2012 by Nathan Furr with No Comments
The industrial revolution transformed the business landscape, just as the managerial revolution transformed how we manage large firms. Today, a third revolution, an entrepreneurial revolution, is underway, shaking the very foundations of what we believe about entrepreneurship. What does this mean for entrepreneurs?
Take the example of Greg Whisenant at CrimeReports.com. As an entrepreneur, Greg was doing everything right according to traditional wisdom and it was killing his business. It started several years earlier when Greg’s apartment building had been robbed. Frustrated and feeling a need to do something about it, he joined a neighborhood watch group and offered to map crimes happening in the area.
As Greg continued, he came to believe that mapping the locations of crimes would align and empower the efforts of citizens and police to reduce overall crime in each neighborhood. So then he did everything right according to standard entrepreneurial wisdom: he had a big vision, built a product, landed a customer, raised venture financing and hired a team.
But despite his best efforts, doing everything right was leading nowhere quickly. In fact, after several years, Greg had still landed only one customer. But once Greg changed his process, in the next three years he landed over 2,000 paying customers. So what was the difference?
Several years ago, my co-author Paul Ahlstrom, a serial entrepreneur and experienced venture capitalist, set out to write a book, Nail It Then Scale It. Based on my research and his experience, we worked to describe a new entrepreneurial process. The process we articulated involved nailing your business and, for Greg and all entrepreneurs, the journey should begin by nailing a pain.
…we argued to Greg that he needed to stop building, get into the field and uncover the Monetizable Market Pain—a pain so significant that customers will return your cold calls.Unfortunately, most entrepreneurs begin with their idea and build a product. Instead we argued to Greg that he needed to stop building, get into the field and uncover the Monetizable Market Pain—a pain so significant that customers will return your cold calls. If you don’t uncover a Monetizable Pain (and we measure that by 50% of your potential customers being willing to return your call), then you probably don’t have a sustainable business worth your blood, sweat and tears.
So how did Greg do this?
He stopped building and started talking to everyday people and police departments. He quickly discovered that everyday consumers wouldn’t pay for his service and that police departments hated his advertising-based business model. At this point, Greg and his fellow founders began to despair, but as they continued to listen (rather than sell), they discovered some crucial pieces of information.
For one, police officers were fascinated by the data possibilities of the website and were excited about leveraging the Internet to increase the quality of their communication with citizens. Police chiefs and officers could now use a data “dashboard” to track trends and daily activity.
As the enthusiasm built in each conversation, the CrimeReports founders learned that police would actually pay them to post their data – advertising wasn’t necessary. As they continued to learn and refine their prototype, the feedback from customers was astonishing. Their customers said things like:
“This blows other choices out of the water.”
“We’ve been trying to do this for years.”
“It used to take us six months to get this kind of data. Now we can get it the next day.”
The number of police departments purchasing the product went from one customer to over 2,000 paying customers in three years. And not only did customers clamor to sign up, but the CrimeReports website jumped in popularity with everyday citizens. Applying the process was nothing short of transformational.
Nathan Furr is an Assistant Professor of Entrepreneurship at BYU’s Marriott School. He received his Ph.D. from Stanford University’s Department of Management Science & Engineering, as part of the Stanford Technology Ventures Program. Furr’s research and writing is devoted to the management science of entrepreneurship and translating it into practical insights. He is also co-author of Nail It Then Scale It.
Posted January 27th, 2012 by Nathan Furr with No Comments
By Nathan Furr, Author of the Lean Startup Book – Nail It Then Scale It
The word pivot has become incredibly popular among entrepreneurs to represent the idea that entrepreneurs should test their assumptions, then adjust (or pivot) when they learn something new—in other words, course correct. The idea is powerful and helped push entrepreneurs in the right direction by making them realize that they need to change to capture an opportunity. But recently I’ve begun to worry—in the flurry of enthusiasm for pivots, many entrepreneurs have come to believe pivots will save them, but they can kill you too! Here’s how.
The Pivot Trap
Pivots are a powerful tool to adjust when you find out your assumption is wrong. However, as I observe entrepreneurs that I mentor and in the Lean Startup Research Project which I lead, I’ve noticed a disturbing trend: many entrepreneurs pivot endlessly but never really seem to capture an opportunity. It leads them to a long and painful death, even if they danced like a butterfly on the way there. How could that be? Wasn’t the point of pivoting to help you capture an opportunity faster and better than stubbornly refusing to alter your plan? Yes, pivoting helps you adjust but let me explain the trap.
Local Hills versus Distant Peaks
Let me borrow a metaphor from strategy that will help frame the discussion. When strategy academics get together, we sometimes describe competition in terms of a landscape filled with valleys, hills, and peaks. The ultimate goal when scaling a business for an entrepreneur is to find a peak—a really big opportunity—and climb to the top. However, I observe entrepreneurs falling into the following trap: entrepreneurs often start on a hill (not the big peak, but a modest opportunity) and then begin pivoting. Each pivot helps them climb a little closer to the top of the hill, which feels like progress because things are improving, but in fact you are only getting a little closer to a modest summit—one that may not actually be a business that supports you or be the big splash you were dreaming about. All the while, entrepreneurs (because they are pivoting and making progress) forget to look around for the big peaks—the really big opportunities.
What Pivots Should Feel Like
So what should successful pivots look and feel like? From my experience and observations, you should make a handful of pivots (three, four, maybe five) and then really see your customers’ eyes light up. After a few pivots you should see a sudden spike in interest and the feeling like you just discovered a big opportunity. Then after that you will make some more pivots, maybe many more pivots, which help you optimize the big opportunity. However, it shouldn’t feel like you are endlessly making small pivots with small results. If you feel that way, I would challenge you to ask yourself the question—have I found the big mountain yet and am I satisfied with the hill where I am sitting now. You may not need a pivot—you may need a leap.
Take a Look Around
In closing let me say that these are general observations that are emerging from the Lean Startup Research Project, I conducted and from my experience mentoring startups. Of course, there are no universal laws and some entrepreneurs will pivot many times before finding the mountain. The point though is though: don’t forget to take a look around before you endlessly optimize. In closing, remember, pivots are good in general, but pivots are not the point! Capturing the big mountain is the point.
Posted October 26th, 2011 by Nathan Furr with No Comments
Startup Business Model:
I see more and more entrepreneurs who seem to have everything going for them – vision, motivation, passion, even a good business plan, product, and money, and yet they can’t close customers. Maybe it’s time to look harder at the mantra of a new breed of gurus and successful entrepreneurs, including Steve Blank and Eric Ries, called “nail it then scale it” (NISI).
You can review all the specifics of this approach in a new book by Nathan Furr and Paul Ahlstrom, appropriately titled “Nail It then Scale It: The Entrepreneur’s Guide to Creating and Managing Breakthrough Innovation,” but I will net it out here. I found their five phases of the process to be compelling, based on my own years of experience mentoring startups:
Full story at Forbes: Adopt the New Startup Business Model
Posted October 26th, 2011 by Nathan Furr with No Comments
Zions Bank “Speaking on Business” Broadcast
Chris Redgrave the host of Zions Bank “Speaking on Business” radio program and former general manager of KSL NewsRadio in Salt Lake City featured Nail It Then Scale It this morning on KSL 102.7 FM. You can download and listen to the radio broadcast MP3 here.
October 25, 2011
This is Chris Redgrave for Zions Bank Speaking on Business.
Over 20 years of work, reading dozens of books on entrepreneurship, raising more than $500 million and participating in the growth and investment of more than 100 companies, investor Paul Ahlstrom identified patterns of success . . . and failure.
The death rate of innovation and start-ups is around 80 percent, which doesn’t mean the idea didn’t have value. Paul and BYU professor Nathan Furr discovered one of the reasons for the death spiral is the order of the process. So, they co-authored “Nail it . . . then Scale it,” a business book dedicated to the “studied” process of successful innovators. This is a “how to” book about starting your own business.
The book is intended for business people who want to launch successful products by first understanding how their innovation fits the customer’s needs. It teaches how to set up a relentless pursuit in solving problems by understanding what the outcome looks like to the customer before building it.
Believe it or not these are some of the steps often overlooked because of the love affair between the inventor and the idea. The entrepreneur’s excitement of scaling, or accelerating, the program often overlooks what the customer is trying to accomplish. By scaling too early, before you nail it, you can waste important investment dollars on product development.
The authors have real-life examples of how the “Nail it then Scale it” model has been successfully applied. For example, the company Crime Reports was following the traditional business program until they fell into the three myths of entrepreneurship.
When challenged with funding and a looming business crisis, which the authors say forces you to focus, that’s exactly what Crime Reports did. In the beginning they had passed over an extremely important step in their customer’s assessment so they stopped everything until this was mastered. Within one year, they went from one to 200 customers and within three more years to 2,000 customers.
The authors of “Nail it then Scale it” like to say, “Entrepreneurs innovate, customers validate.”
For Zions Bank, I’m Chris Redgrave, speaking on business.
Posted September 21st, 2011 by Nathan Furr with No Comments
My friends at Startup Genome just released a report on why startups fail. After analyzing surveys from 3,200 startups they concluded that of the majority of startups that failed, 70% fail because of premature scaling. Although, I did not run the analysis, based on the research I conducted for my recent book, Nail It then Scale It, I couldn’t agree more—most startups fail precisely because they try to scale too early. Oh yes, and by the way, premature scaling also kills innumerable new projects at existing businesses as well, so innovators everywhere, beware.
But what is premature scaling anyway? In the report released by Startup Genome, I define premature scaling as “spending money beyond the essentials on growing the business (e.g., hiring sales personnel, expensive marketing, perfecting the product, leasing offices, etc.) before nailing the product/market fit.” While it sounds simple enough, the message of Nail It then Scale It is that most startups are dying and they are dying because they are doing good things but doing them out of order. In other words, they are doing things that seem to make sense, like investing to build the product, hiring good people to help them sell it, developing marketing materials, and essentially doing all the kinds of things that big companies with lots of resources do when they are executing on a known opportunity. But most startups are chasing an idea: the founders, no matter how much they believe in their idea, are operating on a guess about an unknown opportunity with a potentially unknown solution. All these unknowns mean we need to manage the process of coming to market differently and number #1 on the list is to avoid spending money scaling the business before you have really nailed what customers want and how to reach them. As the report points out, it often takes 2-3 times longer than founders expect to really nail the product before scaling the business really becomes appropriate.
Although it may seem over simple to ask, the reason that premature scaling kills startups is primarily two-fold. First, premature scaling uses up your precious cash more quickly, which means you have less runway to discover that you were wrong and readjust. One of the smartest strategies for a startup is to save cash wherever you can because it gives you more chances to try and get the fit between your product and the market correct. Think of it like a baseball game: the old model of entrepreneurship was to throw all your money into taking one big swing whereas the new model is preserving your cash so you have as many swings as possible to try and hit a home run. My friend, and superinvestor at Floodgate, Ann Ko points out in her lecture at Stanford, in today’s business environment you never want to run out of chances to iterate. Second, premature scaling actually makes you less agile. Specifically, when you start hiring people and investing in your product, you become organizationally and mentally committed to your current approach—you’ve paid money and obligated yourself to a particular product or strategy and doing this makes it worlds harder to change. In economics this is known as the sunk cost trap and in psychology this is known as escalation of commitment—in both cases it can kill a startup quickly.
So why do entrepreneurs fall into the premature scaling trap? Because of what I call the Entrepreneur’s Paradox. Essentially, if entrepreneurs didn’t really believe in their ideas, they would never have the courage to risk their effort, reputation, and money by taking action. But precisely because entrepreneurs believe so deeply in their idea, they jump into action by investing in creating a business, building a product, and then spending the money to try and sell it. What they almost always overlook is one deadly fact: that their belief is only a guess at what customers want that needs to be quickly and iteratively tested in the market before doing all those other “good” things.
In future posts I’ll write about a startup that is part of my Lean Startup Research Project that avoided the premature scaling trap. The entrepreneurs at Burt, a fascinating company revolutionizing the advertising world with novel advertising analytics, almost fell into the premature scaling trap several times. They waited patiently until they had really nailed every aspect of their business and now are scaling successfully today. I look forward to sharing more about their story in the future.
Posted September 20th, 2011 by Nathan Furr with No Comments
Most of the good startup wisdom out there, from Lean Startup, to Customer Development, to Y Combinator, emphasize engaging customers early by building something that offers the product concept or a product feature and then measuring customer/user response. This methodology is way smarter and faster than the old startup (and current big company) process of building out a real product and hoping users come. However, there is a first step that can get you to must-have and product/market fit even faster.
Offering a minimum viable product is a fantastic way to learn what target customers want. I do it all the time. The only problem is the learnings you get don’t always lead to a breakthrough product focused on monetizable pain. The reason?
Monetizable pain is about the customer’s problem, not the startup’s product.
Validating monetizable pain requires a method for measuring the value of a problem. It requires the development of a reliable metric for customer problems. Unfortunately the well known business metrics don’t really help us because they have much more to do with the solution side of the equation. For instance, one obvious business metric is sales. Sales can measure the success of a product. But nobody buys problems. (They unfortunately arrive free of charge.)