Getting to "yes" in a world of "no"…

Just as Stephen Hawking’s “A Brief History of Time” had an extraordinarily high (buy:read) ratio, Steve Blank’s influential self-published book “Four Steps to the Epiphany” (first three chapters are online here) has an extraordinarily high (cite:buy) ratio – almost everyone relies on online summaries of what it says, rather than actually read it for themselves.

In some ways, this is a good thing because – as even arguably its #1 fan Eric Ries felt compelled to point out – the book is a tad leaden. Yet even so, Blank’s core idea (that customer development-based iteration should be at the heart of nearly every startup’s overall business development, with product development very much a secondary process) is the kind of thing that has swung strongly into startup fashion over the last few years, for the simple reason (I think) that it’s solid gold. The days of “if you build it they will come” are now thought to be long gone: if anything, the business compass has spun right around to Jim Coudal’s (2005) “if they come, you will build it” – basically, build the audience before you build the product. Incidentally, Coudal mentions “design entrepreneurship” as a specific influence here, which is pretty much exactly what I do (though “industrial design entrepreneurship” is arguably even closer).

Without much doubt, for certain industries such as book publishing (I also run my own niche publishing house, so know plenty about that), I’d say this is an excellent model. In fact, for several years I’ve advised non-fiction authors to blog extensively before writing a word, so as to build up their personal audience – it’s as much about your finding out about them as about their finding out about you. As a general rule of thumb, I’d say your blog needs to get roughly a million visits (and to have roughly a thousand people subscribed to it) before the economics of book publishing begin to work in your favour. Doubtless this is true for many other industries too.

But… is it true for tech startups?

I think the root of the opposite position – non-listening MBA-centric business plans, such as the disastrous WebVan roll-out Blank cheerily cites – lies in a kind of mid-century Father-Engineer-Knows-Best industrial paternalism. And that would be a bit of a straw man for Blank to argue against in 2011, as contemporary entrepreneurs (though possibly not business schools en masse) have become very much savvy to the idea that their customers somehow hold most of the important answers.

Yet even Blank doesn’t go as far as Coudal seems to have gone: having got tired of being the work-for-hire mindshare guru (temporarily wedged between the product guy and early customers), Coudal’s personal epiphany seems to have been that mindshare holds pretty much all the value in the equation, and the rest is mere execution. That is, he redrafted the seating arrangement such that the product guys became the work-for-hire gurus working for him.

Plan, execution, mindshare, customers: for Coudal, the mindshare comes first (plan? what plan?), while I suspect Blank is more about execution – ultimately, he just wants customers into the overall loop to help iterate the plan right. So, to me Blank’s epiphany seems more about looping, which is the part Eric Ries seems to have taken most on board for his Lean Startup ideas.

But does this tell the whole story? In the end, I suspect that Locard’s exchange principle (from the field of forensic science) is even more revealing. Edmond Locard theorized that “with contact between two items, there will be an exchange”: its relevance here is that I think every startup should see its contacts with customers as a two-way street. That is, you don’t meet customers in order to change them, you meet them in order to exchange with them. What Blank highlights is arguably only half of the traffic (i.e. what you learn from customers, how they change you): but at the same time, they do learn from you, and their buying behaviour may well change as a result – but not necessarily in the way that you hope.

In many key ways, I’m sold on Steve Blank and Eric Ries’s worldview – repeatedly bumping things up against customers is pretty much the only way to build things that really work for them – but that’s just an industrial design principle, not necessarily a business development principle. The open (and extraordinarily problematic) question remains this: whether Blank/Ries-style learning startups can ever satisfactorily be funded by business angels. Without some best guess as to when you’ll have learnt enough to ship, how can you ever agree a funding arrangement?

Much as I admire them, I can’t help wondering: by encouraging entrepreneurs to iterate and grow their startups through learning, are Blank and Ries unwittingly creating a generation of unfundable startups? Where’s the Lean Funding Movement to match their high principles?


Comments on: "Steve Blank’s “Four Steps to the Epiphany”…" (4)

  1. […] the one hand you’ve got Steve Blank proposing his Customer Development startup loop, Eric Ries proposing his Lean Startup development loop, and (one you may not have read about) Alex […]

  2. […] the paradox: even though Fred really likes lean startups (he lauds Steve Blank’s Customer Development Cycle and Eric Ries’ Lean Startup Movement), he clearly doesn’t believe that lean […]

  3. This commentary takes Blanks point of iteration against VC acceptance, and concludes what…that funding is unobtainable? Nonsense. A common problem with start-ups is that visionary engineers lack customer relational skills, and as a result focus on where they add value to the product development process. In this 21st century economy, 1990’s thinking is incredibly deadly, leaving little margin for any crumb of success.

    • Dave: as I asked Eric Ries when I met him, where are all the Lean Angels? In truth, there are no more than a small handful of them in the US, and practically none in the UK. Compare and contrast with the book sales for The Lean Startup – without much doubt, it’s wanna-be / would-be tech entrepreneurs that bought it as their height-of-fashion Business Bible, not business angels. Where in his book is the Lean Funding Methodology? Or perhaps that’s going to be the sequel… I can always hope. And so, The Lean Startup is, as far as I can see, an unbalanced funding equation, with a preponderance of startups on the supply side and no obvious Lean Angel presence on the buy side. Unless you know different?

      I’d agree that customer relational skills are (and pretty much always have been) sorely lacking in tech startups, but I argue that what is even more lacking is the humility and self-awareness to genuinely take on board lessons from customers and change yourself accordingly. As I said in the post, Steve Blank seems to see customer feedback as good for looping, i.e. for iterating a plan: but I would argue that it’s even better for helping effect personal and corporate transformation, the so-called “gut-wrenching pivot”. Hence I’m not sure what your jibe at “1990’s thinking” is aiming at, so please let me know what it is I’ve missed here.

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