Lean Startup and Natural Enterprise

The Lean Startup concept has been developed and championed by highly successful US Technology Entrepreneurs Steve Blank and Eric Ries. It appears to be based mostly on their attempts to understand why they, and others like them, were successful business managers and inventors—eventually. The Lean Startup concept is changing radically how entrepreneurship is taught, and by whom. It has become a world movement in a little over 2 years, and it doesn’t just apply to small business starts. Unlike conventional enterprise/entrepreneurship teachers/educators based in Business Schools, Ries and Blank build on lessons learned by engineers, manufacturers and product designers: e.g., on lean manufacturing, design thinking, and agile methods of software engineering, so it appeals to inventors, geeks, and techies. The Lean StartUp approach is claimed to be scientific because learning to create a business progresses on a series of experiments, hence, entrepreneurship can be taught as a ‘management science’. At its core is systematic learning and problem solving. One becomes a highly successful entrepreneur, and maybe the owner of a global business, by solving problems and developing customers through experimentation and validated learning. That’s exactly the message this blog is trying to put out.

There’s something else about Lean StartUp that may not be fully appreciated, it’s anarchic, in the sense that it does not start with a business plan, nor a formal legal business entity. Before you do either of these, you ‘get out of the building’ and talk to the people who you think might become your customers, the people with problems you might be able to solve. Engaging with people before they become customers means that you don’t know them, and they don’t know you. To solve their problems, to improve their lives in some way, requires you get to know them, and them you, and what you have to offer. If you discover that they do have a problem you think you can solve, what happens next is that you realise you might be able to do them some good. This is as natural a form of human behavior you are likely to experience. Doing good for others is a most natural form of enterprise. See also my other blog here

What does getting out of the building mean? It means talking to the people who you think might benefit from your marvellous new invention. It means engaging them in a conversation. Now consider the diagram here. It represents my efforts to cover the process that Steve Blank calls the Customer Development Process.

E=MC3 feat sol

The conversation opens with the search for a problem to solve. This is conversation 1. An enterprise, an organisational entity or system eventually emerges from this conversation.

The diagram uses the systems dynamics convention, also known as stock-flow diagramming, or cause-effect diagramming, made fashionable by Senge (1990).  Each circle represents a stock or an entity in the process of transformation: adding things to, taking them away from what exists, or transforming them. Following Blank’s Customer Development model, the first conversation takes place between an enterprising person (EP), the potential solution provider, and a problem owner (PO) and prospective customer.

There are many possible results from their initial encounter. The first three are evident in Lean Startup.

i) A problem definition emerges

ii) A solution definition emerges

iii) A relationship develops between the EP and the PO anchored by a solution concept.

iv) If the solution is of sufficient value to the problem owner, he or she might be prepared to pay for it, in which case you have what is ambiguously called a business opportunity, but what it actually is is an opportunity to do good, to create something that will be of mutual benefit.

The are, however, less tangible results.

iv) Both will now be more knowledgeable of each other.

v) Both will identify with the problem and the solution that emerges

vi) The EP has become a solution designer, or engineer in practice, and potential owner of an IP asset and something the PO now values.

vii) the problem owner might see themselves as the solution owner too. This could be contentious when it comes to agreeing IPR.

Now focus to the left of the system model and conversation set 2. In the process of problem solving, the EP might have to refer to others who hold knowledge he or she believes to be appropriate.  As the problem progresses to a physical form he or she might have to converse with component suppliers, and to purchase these he or she might have to seek funds. Again there are multiple results for these conversations but the most important will be relationships, which, again, will be anchored by the solution. If and when these relationships become ‘sticky’, they may be preserved in a more or less permanent network. In other words, an identifiable structure, an organisational entity. A formal and legally constituted enterprise might eventually take shape and in doing so expand into the space previously occupied by the EP. Such a structure is, again, anchored by the particular form a solution takes. The knowledge and the materials sought will also be dictated by the specific nature of the solution. I effect, the solution also serves to lock-in everyone involved, that is, all those who have a stake in the solution’s commercial success.

If it is the EP’s intention to proceed to establish a formal business, a further set of conversations must develop to acquire more customers and to retain them. Conversation 3 begins as the problem owner  becomes a customer. Two channels need to be established if relationships are to be developed with customers. Two ‘out’ channels, the familiar channels of distribution and information giving (advertising) through potential customers are informed about the solution and its benefits (and alerted to the possibility they have a problem they never before appreciated they had. The in-channel, performance feedback, is a means of receiving information from solution users. As the conversations cycle, C3 iterates, market segments begin to emerge, which are revealed through the performance feedback channel. Information here is fed back into product-solution development process. The way in which the model here is designed, customers have a relationship with the EP (or his or her organisation). What have been depicted here as channels, to reflect the Business Model Canvas, could be treated as external organisational entities, or incorporated into the emerging organisation formerly known as ‘an enterprising person’.

I hope you can see that this model, stripped of all the legal requirements of setting up a formal business also describes a form of Natural Enterprise. Blank and Ries, have, maybe accidentally, revealed the essence of being enterprising. Doing good for others and oneself, in a mutually beneficial exchange, which does not have to be for money.

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