entreSociety

Building an entrepreneurial society

Archive for the month “December, 2012”

Demystifying the lean startup methodology

There has been a lot of momentum around the lean startup methodology that has its origins in Silicon Valley.  The momentum is starting to create a flavour of the month backlash.  Much of this backlash, as with some other developments in the past, is the result of misunderstanding what it is and how to adopt it.  I wanted to offer some thoughts that might help demystify this lean startup thing.

The lean methodology incorporates all of the considerations that should be in any traditional business plan.  A company has to understand the need it is addressing, the solution to address the need, who the customer is, how they will interact with those customers, resources they will need, pricing and cost structures and key activities.  What is different is how a start-up considers all of these factors.

Traditionally a start-up takes a book or software application and prepares a complete business model with exact details on how the plan will be executed.  There is no explicit acknowledgement that the plan is full of assumptions and not known facts.  The start-up team might even go beyond the plan and start spending time and money building the solution.  It is only when the team has its first interaction with customers that it finds out that many of their assumptions were wrong.  Compounding this oversight is that, with a plan, there is a tendency to forge ahead despite negative market response.  The team decides that the customers just don’t get it and flounder around constantly revising their message in an attempt to convince them that they want something they don’t.

The lean approach in contrast is based on the premise that everything in the initial business concept is an assumption.  Rather than building a detailed plan the lean approach starts with a short form description of the business model as the start-up team envisions it.  Each of the elements of the business model will be tested with customers as early as possible starting with the need being addressed.  As the team learns from its customer interactions it is able to make course corrections before it has committed a lot of time or resources.  Effectively the start-up team is building a business plan but is doing it in partnership with its customers.

What the lean approach does that the traditional approach doesn’t is allows for a business concept to be abandoned or adjusted at any time it becomes apparent that the market has no need.  The team can then move on to another idea that may have more market acceptance while they still have resources and time to do so.

I don’t mean to trivialize the difficulty in implementing the lean approach.  It requires a new way of thinking than we have been taught or continue to be taught.  I will discuss implementation challenges in future posts.  My objective in this post was to point out that we are not being asked to throw out the fundamentals of business building and start from the ground up.  We are just being encouraged to take a different approach to planning and executing these fundamentals.

 

Social entrepreneurs as catalysts for building entrepreneurship

In the last post we identified the need to have entrepreneurs become the leaders in building an entrepreneurial society.  We also acknowledged that these entrepreneurs would have to choose to take a leadership role and that is not always easy to encourage.  But there may be a sub-segment of the entrepreneurial community that would be predisposed to leadership and that is social entrepreneurs.

Social entrepreneurship is a rapidly emerging segment and will eventually evolve to the point where the social prefix will no longer be necessary.  But social entrepreneurs do bring a unique approach and that is one of being substantially driven by passion.  They also have to overcome many obstacles not experienced by traditional entrepreneurs since they tend to work with difficult problems.  Finally, they have been forced to support each other since they fall into a gap between traditional not-for-profit and traditional private enterprise.

It might also be possible that regions with low levels of entrepreneurship have more social issues to deal with compared to thriving entrepreneurial communities.  We should consider starting to build an entrepreneurial community with social enterprises led by social entrepreneurs.

Social entrepreneurs will also rely on the same support networks that traditional entrepreneurs require.  As the entrepreneurial community builds the support networks will become stronger.  These entrepreneurs will also serve as role models and mentors for traditional entrepreneurs.

Finally, if we look at a major objective of an entrepreneurial society it is to resolve the challenges we face through multiple entrepreneurial ventures.  Since that is what social ventures are about we could find ourselves better off by having them take the lead.

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