The Promises and Perils of the Hollywood Style Pitch

How can organizations quickly and effectively gain support for new business ideas?

Hollywood

Hollywood wheeler-dealers are famous for pitching new movies to studios with a formula that combines two successful old movies. Robert Altman’s 1992 comedy The Player fictionalized pitchmen who proposed such fantastic ideas as “Out of Africa meets Pretty Woman” and “Ghost meets The
Manchurian Candidate
.”

Technology companies are also prone to ridiculous-sounding analogies when touting their potential. A recent survey of startups on AngelList, the angel investment platform, brought up these combinations:

Slack meets Kickstarter

Yelp meets Tindr meets Instacart

A Spotify with Pandora on top

eBay + Soundcloud

Think Flipboard and Hootsuite in one

The aim of these formulas is to simplify a complex idea and at the same time fasten it to the outsize growth and wealth-creation potential of wildly successful former startups that pioneered new business models.

Investors are just as likely to latch onto this kind of business-model combination when giving advice. If they’re trying to grasp your idea quickly, then they too have to lean on shorthand descriptions of its power and growth potential. They call this skill “pattern matching.”

Startup-technology-company value is driven mostly on this “comp”—the comparison between a company that has yet to show any revenue or profit and similar ones that have already unlocked massive growth potential. (“It’s like Netflix meets Pinterest.”)

Even big, fearless, world-changing public companies get prompted by large investors to mash up their business models. Morgan Stanley Equity analyst Adam Jonas recently increased his Tesla stock price target $280 to $465 by predicting how Tesla could become another Uber. He even gave the concept he envisioned a name, Tesla Mobility, an “app-based, on-demand mobility service.”

Jonas’s “Tesla meets Uber” idea would allow the carmaker “to conceivably more than triple the company’s revenue potential by 2029.”

Jonas’s analysis came after a question of his went unanswered during Tesla’s most recent second-quarter-earnings announcement call with analysts:

Jonas: Hey, Elon, Deepak. First question. Steve Jurvetson was recently quoted saying that Uber CEO Travis Kalanick told him that if, by 2020, Tesla’s cars are autonomous, that he’d want to buy all of them. Is this a real—I mean, forget like the 2020 for a moment—but is this a real business opportunity for Tesla, supplying cars to ridesharing firms, or does Tesla just cut out the middleman and sell on-demand electric mobility services directly from the company on its own platform?

Musk: That’s an insightful question.

Jonas: You don’t have to answer it.

Musk: I think—I don’t think I should answer it.

Jonas: Okay. Let’s move on. Second question is, there’s been—sometimes you can tell more from the non-answer than from the answer.

Jonas’s idea is far from crazy. After all, Tesla has a software expertise that positions the company well ahead of other automakers; it’s in the process of figuring out the complexities of electric charging and fleet management; and it is run by Elon Musk.

But what’s maddening to public-company executives and startup founders is the brazenness and the oversimplicity of these mashups:

Tesla meets Uber

Netflix meets AngelList

Quirky meets Zirtual

Still, as ridiculous as this shorthand may sometimes sound, it can be extraordinarily powerful—and thus extraordinarily frustrating to a company whose successful business model has been reduced to a clever portmanteau.

What’s valuable about business-model combinations

Clear and persuasive elevator-timeframe communication

By coming up with a quick description that compresses a complex idea into an understandable analogy, you open the door to a deeper, more nuanced discussion when time permits. The biggest benefit of an elevator pitch is that it gets you invited to explain more.

Business-model combination and replication

The growth of the Lean Movement and the widespread adoption of Osterwalder’sBusiness-Model Canvas have fueled the thinking of a new generation of entrepreneurs focused not just on product/service innovation but on novel business-model approaches as well. Large companies that have advanced far beyond startups engage in business-model combinations when they launch new services and acquire new companies. In fact, 90 per cent of all business-model innovations recombine existing ideas and concepts from other industries. (St. Gallen Business Model Navigator Survey. Gassman, Frankenberger, Karolin. 2014).

By creating a shorthand way of thinking about business models, innovators quickly demonstrate how a new business-model combination might unlock new value.

What’s frustrating about the Hollywood-style elevator pitch

Comparing an already successful company to something that doesn’t exist yet

Reducing business models to mere company mashups can mislead investors. The most often cited companies—Netflix, Amazon, Google, Facebook—are successful because they have a huge customer base, a well defended competitive advantage, and a profit formula that works well for them.

But each of them began business-model formulas that are completely different from the ones that describe them today.

Looking at business-model combinations vis-à-vis where you are today

So don’t just say that you want to Netflix your business, or that you’re worried that you’re about to be Netflixed. You need to be more specific. The company is a world-class business-model experimenter that’s constantly combining new business models with its already proven and successful original model.

Netflix started with a direct-to-consumer subscription model, delivering its goods in the mail. It then cannibalized part of its business when its switched to streaming video, frustrated customers with a change in the pricing model, but later weathered the storm and continued to grow. Netflix uses its enormous data-collection capabilities to optimize further sales—“If you liked My Little Pony, then you’ll like Strawberry Shortcake”—and to enhance its predictive algorithms as they apply to its original-content business (“House of Cards meets Orange Is the New Black”).

Every one of the company’s new business-model combinations creates further lock-in with the customer base.

So when your boss or board asks, “Have you thought about a model that’s more Netflix?” make sure that you know which combination of Netflix business models you’re being requested to consider. When a startup describes itself as “Kickstarter meets Spotify,” it may not fully comprehend the hurdles it will encounter starting a two-sided marketplace plus a social network plus an advertising model.

At Reason Street we’ve launched a Business Model Library for people who want to build their knowledge of how businesses work. Has someone told you to go Netflix or Spotify or to Uber your business, leaving you struggling to understand how? What business models are you thinking about? Let us know what business model or company you want analyzed, and we’ll add it to our growing library. We also conduct business-model-combination workshops to free up your thinking in constructive ways and put you on the path to business-model innovation.

Google’s Dominant-Logic Problem

Dominant Logic Monster

 

Google’s Dominant-Logic Problem

Google has announced that it will become Alphabet, a conglomerate—that old-fangled complex corporate structure popular in the 1970s.

Could the conglomerate structure, as Google is defining Alphabet, represent the boldest and most innovative move yet within the entire class of super-tech companies?

Google is not the first company to confront the dominant-logic problem, which can cause successful companies to self-destruct, but it is doing so in a way that both challenges and appeals to Wall Street.

The Catch-22 of doing what the Street wants a publicly traded company to do

Google just had its best quarter ever; the announcement led to the biggest stock gain in a day in history. When Google unveiled the new conglomerate structure, the stock bumped up yet again. In just one month the company’s market valuation has increased by more than $100 BILLION dollars (as of today). Take that, unicorns.

But prior to this breakout quarter, Google’s stock had suffered 18 months of flatlining.

GOOGL from Google Finance 3 Months

A flat stock was a real danger. Google’s senior management was being lured away to better performing companies, like Facebook, and newly formed private companies with mere billion-dollar valuations but more promise of upside.

What was going on during these 18 dismal months? It looked like Google was following the business-school playbook in organizing to capitalize on its core competency, but then got dinged in the process.

While Google has made a number of high-risk “moon-shot” bets—self-driving cars, autonomous drones, life-extension projects, and more—it had put most of its financial and human capital into the cash-generating part of the business. Even back in 2008, as it began making riskier bets, it acknowledged that “we don’t put many people on those things; 90% work on everything else. So that’s not a big risk.

But that wasn’t reassuring enough for Wall Street, which likes clean valuations and highly predictable revenue.

The Street was discounting Google’s core business because of the moon shots.

There is a reason that Silicon Valley suffers from IPO phobia.

Wall Street was telling Google to stick to its knitting—to keep doing what it was already good at, to stay with the “dominant logic.” But just doing what you are already good at can kill you in the long term.

The dominant-logic problem

Dominant logic is the disease that killed Kodak, Blockbuster, and Nokia, and it threatens every successful large-scale company facing disruption—which is all of them, including Google. The danger isn’t so much the disruption itself, a product of fierce new competition and shifts in the technology landscape; it’s the faulty mindset that hampers senior management when it’s preparing for and responding to non-linear change.

“Dominant logic consists of the mental maps developed through experience in the core business and sometimes applied inappropriately in other businesses.”—C.K. Prahalad, The Dominant Logic: a New Linkage Between Diversity and Performance (paywall).

Prahalad was researching the failure of diversified conglomerates in 1986, when voguing was in vogue and conglomerates were all the rage, when he reached that conclusion. He found that a top executive group’s ability to manage a diversified firm is limited by the dominant general-management logic it already knows.

If the companies in the conglomerate are similar in type and from the same industry, as, for example, at P&G, then this logic—applied to spending on R&D, product development, marketing, and organizing and incentivizing employees—can work to its advantage. But when the companies in the conglomerate are deeply diversified, the situation gets complicated.

As Prahalad observed, “Typically, the dominant logic in diversified firms tends to be influenced by the largest business or the ‘core business’ which was the historical basis for the firm’s growth. The characteristics of the core business, often the source of top managers in diversified firms, tend to cause managers to define problems in certain ways and develop familiarity with, and facility in the use of, those administrative tools and are particularly useful in accomplishing the critical tasks of the core business.”

When management’s mind-set favors the core business at the expense of preparing for technological, market, and social/cultural change, its dominant logic can undermine the company’s chances for survival.

Anyone working in the innovation department of a Fortune 1000 company knows in their bones that the dominant business model can kill breakthrough growth ideas.

The thinking goes like this: “You can tinker with our product, spend countless hours investigating corporate ethnography, or design thinking exercises, drum circles, and lean-start-up experiments. That’s fine. But as soon as you mess with the way we’ve been making money, you will be escorted swiftly out of the building.”

Prahalad also foresaw what had begun to happen at Google: the management team that grew up around search tended to favor product-development ideas that made the core business stronger.

Google X and the moon-shot wagers amounted to little more than rounding errors in the company’s financial results, mere experiments with uncertain outcomes or upsides for the employees involved.

This strategy was never enunciated outright by Larry Page and Sergey Brin, who were in fact the biggest proponents of the moon-shot investments. But the very organizational design of housing these experiments within Google, where the dominant-logic problem reigned, made everything else pale in comparison.

Perhaps the founders simply weren’t satisfied with Wall Street’s definition of success: mastering the shift in advertising to web and mobile. The uppermost limit for Google was a larger share of the advertising pie.

“If you’re changing the world, you’re working on important things. You’re excited to get up in the morning.”—Larry Page

I can empathize with billionaires who find advertising limiting as a life’s pursuit. I can see why it would be hard to get up in the morning when that’s your only goal.

How Alphabet addresses the dominant-logic elephant in the room

Google’s newly hired CFO, Ruth Porat, likely had a heavy hand in creating the new structure, which separates YouTube, Android, and Google’s core search business from all the other riskier, less profitable companies. Wall Street is happier because now it can properly value the entire structure.

Dealbreaker said that splitting up these businesses “is akin to injecting steroids into Google’s P/E ratio.” (That’s price/earnings ratio, the prediction of a company’s future value based on its current earnings.) “It is A) The kind of thing that Silicon Valley doesn’t really do, and B) The kind of thing that Ruth Porat can think up in her sleep.”

Alphabet is the ultimate homage to pension managers and hedge funders. “We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for!” Larry Page wrote on the Google Blog on August 10.

Google Glass, the drone-mounted wind turbines, and other experiments will no longer have to justify themselves as adding revenue to the core business. Hooray. The potential upside =for those working on the experiments, with a number of CEOs building quasi-independent companies, will makes it easier to attract and retain talent.

To be sure, this new structure might create more problems than it solves. There have been predictions of infighting among top talent as newly minted CEOs within Alphabet vie for their share of the investment pie.

The comparison to Berkshire Hathaway notwithstanding, Page and Brin now have to develop an operating style, financial controls, and rules for this new game board. Warren Buffett sets up financial filters for Berkshire Hathaway’s acquisitions, then stays completely out of the way and lets the companies run on their own. Will Alphabet adopt this approach?

Organizational design is a start, but it’s not enough. Google will have to address the investment criteria, structure, and valuation of its innovation portfolio. Its famous hiring processes and its HR management will be put to the test; so will the operational practices for which the company has become famous.

But by addressing the dominant-logic elephant in the room, Google may have pulled off the most pro-innovation bet that a leading tech company has ever played.

How about you? Are you inside a company struggling to innovate in the grip of a dominant logic? Are you in a start-up seeking to disrupt an industry ruled by dominant logic? How has dominant-logic thinking hampered your creativity or limited your success?

For more about dominant logic, the reasons that innovation is sometimes regarded as a dirty word, and business-model news, sign up for our newsletter at Reason Street.

3 Business Model Myths Debunked

When is the best time to begin thinking about your business model?

Now.

growing a business model


If you are wondering about how your business will generate revenue and profitability to grow, then start if you haven’t already. But first let’s clear up some myths that plague early stage founders and intrapreneurs when they start tinkering with a new idea:

1. “Thinking about business models in the beginning is a waste of time and energy. Build something big that people love, and the business model will follow.”

We’ve heard this objection frequently when we suggest that now is the time to start thinking about your business model. We’ve heard this objection from a particular type of Venture Capitalist who invests in consumer internet businesses that are only valuable after they achieve large user growth and engagement. These kinds of investors encourage founders to build first, postpone the business model discussion – because they know that ultimately, advertising, or some form of freemium/paid model, will be the default business model. “If you get that kind of user growth and engagement there will be some way to monetize” is a common refrain.

Let’s be clear: the mantra is “user growth first, monetize later” – but by all means start thinking and planning for your long game.

Facebook User Growth vs. Revenue

So as long as you acknowledge that you are in one of these businesses, then focus on user growth first. But don’t be upset when one day you realize you are actually in advertising.

2. “Business model thinking will cramp our creativity.”

One of the most popular tech events in New York City, NY Tech Meetup, forbids audience participants to ask about business models. Demo night is for demonstrations of technology, and you will receive a boo or hiss if you ask the demoers how they might imagine making money from their idea. We still go to NY Tech Meetup, and we suffer, silently.

NY Tech Meetup: A Place Where the Business Model Question is Forbidden

For prototyping, side projects, art projects, explorations of code and ideas – don’t cramp your creative thinking with business model scenarios. But as soon as you get a hint that your exploration might become your livelihood; start thinking about the business model. We’re not suggesting you do something so uncool as to mention the business model on a stage where such concepts have been forbidden, but be ready to invite potential interested backers and partners and valuable customer discovery that will follow you after a successful demo.

3. “It’s all imaginary at the beginning, why bother figuring out the business model now, it’s going to be a complete guess.”

We counter by saying to you that it’s all imaginary at the beginning. But how you form your business will be shaped by the thoughts you choose to think, and the methods you adopt at the start. Your estimates of your total addressable market may be off by a factor of 10, your pricing estimates for subscription fees may be off by a factor of 100. But by putting some numbers out there, and seeing the shapes and contours of what might become will give you a sense of where to focus, and what to build and test first.

Top 20 Reasons Why Startups Fail by CB Insights

Mark Suster, one of the more prolific and wise blogging VCs, even encourages you to create a financial model.

“Here’s why. Your financial model tells a story. Let’s take your revenue line. It should talk about how many customers you think you will acquire and how much you’ll charge for your product. If you can’t estimate the former then I would suggest you haven’t done your homework before building the product. Do you really want to spent $100k building a product to discover through Customer Development that the market is too small?”

If you are asking us, no, you don’t want to do that.

In sum, the best time to start thinking about business models is soon after you form the initial vision of an idea. What kills many early stage startups and corporate innovation projects – they are solutions in search of a market need that does not exist. Most of the other reasons for failure, such as “ran out of cash” “get outcompeted” and “pricing/cost issues” are components of a business model.

So get started, now. Join the Reason Street Business Model Adventure, where we

Now.debunk current business model thinking and explain how business models work. Share your email to get the latest in business model news.

NYU ITP Pitchfest #5: Antidotes to a Technical Culture

5th Annual NYU ITP Pitchfest 2015

Design for self assembly. Connected jewelry for brilliant moments. A replacement for wasteful packaging. Assistive Kitchen tools. Apps for enhancing relationships and serendipitous encounters. Discovery and peer review apps for emerging performing arts. It may be possible for technology innovation to more genuinely connect us to each other.

Red at NYU eLab

Each year at the NYU ITP Pitchfest, a workshop series and Pitch event to leading investors in NYC, we witness an emerging group of digital technologists and artists who explore antidotes to what technical culture has wrought. They have grown with the unintended consequences of perpetual innovation – social media sites that make us more lonely, on demand food services that rely on large volumes of packaging, wearable that distract us and vibrate but create no deeper meaning, knowledge, or connection.

The students skip over the obvious “pain points” and dive deeply into the unmet latent needs that are deeply submerged and underserved by tech quick fixes and distraction apps.

Once they emerge from their first or second year at ITP exploring the imaginative use of communications technologies, Pitchfest encourages students to think of the projects ambitiously. We ask all participants to determine their purpose – why they are driven to do this work and their personal story that motivates them to pursue their vision. We encourage a deep dive customer discovery exercise to test their assumptions and business model hypotheses, and a storytelling exercise to communicate their vision. By telling a story with a vision that is clear enough, compelling enough, and big enough, they have the chance to attract the right people and resources.

Here was this year’s lineup of ideas that need to exist in the world:

Handled! by Zoe Logan

User-informed design approaches for assistive kitchen tools

Empowering differently abled users to access the pleasure of cooking

A graduating ITP student, Zoe developed the first in a series of kitchen tools as part of her thesis project. Zoe has a history in designing, building and prototyping but was motivated to develop assistive technology objects through her experiences at the Ability Lab at NYU. The series includes a stabilizing cutting board and adaptive modular handles for enhancing existing kitchen utensils. From Zoe’s personal statement: “Assistive technology…seems like a field with enormous potential for developing objects that can be interesting and well designed while actually making an impact on a user’s experience and that is important to me.” The designs are available for download-to-3D print on Thingiverse, and Zoe intends to conduct further research before commercializing her series of products.

Learn more about Zoe’s project and view her ITP thesis.

Download Handled at Thingiverse

Download Handled at Thingiverse

Luma Legacy: Alina Balean and Karol Munoz

Smart jewelry for every brilliant moment

Alina and Karol are entrepreneurs exploring the concept of smart jewelry. Their team observed that jewelry always comes embedded with a story. When Karol traveled through Europe with her family, her mother collected charms in each city as a memento. Karol careful curated her photos and comments to a close circle of friends (often far away from Facebook, which reserved for more impersonal updates). Luma Legacy seeks to create smart jewelry that connects digital storytelling the relationships in our lives. For each charm purchased, the owner or gift giver can create a digital story, accessible in a companion app, that is unlocked at a future time, or in a future location determined by GPS. The team have graduated from ITP, and Luma is actively looking for support to launch their first piece.

Get updates about the Luma progress from their website.

Learn about Luma in an early incarnation as a necklace for Alina’s thesis project.

Foodprint: Shaun Axani

Replacing wasteful packaging with a cyclical system for the on demand food economy

Foodprint is a return to the old fashioned milk bottle. Shaun and team have identified a critical fault in the on demand food economy: the huge amount of paper, plastic, and hauling energy required to deliver food direct to the home. If you’ve ever ordered Fresh DIrect, or experimented with new services like Blue Apron, you may have noticed the boxes and plastic containers required. The team aims to make and distribute a deposit-based system of reusable eco-friendly containers, and sell directly to grocery services and restaurants to offer customers an alternative to wasteful packaging.

Shaun is entering his second year at ITP, and will be further exploring the Foodprint concept. Follow Shaun’s work on his personal website.

4 App: Yu Ji

An app for people living in metropolitan areas or who are new to a specific space to explore and start building connections in real life.

Yu Ji created 4 app to experiment in new way of interaction and connection. 4 works as an icebreaker, it helps people to smile, say hi and potentially start building connections/friendships with strangers in real life. For those that have tried other location-proximity-based social networks like Highlight that exposed too many people, too soon, 4 App explores how this interaction could better mirror actual relationship building. After downloading the app, you receive notifications when you pass by another user, but their identities are progressively revealed over time.

After three interactions when you cross each other’s paths, you’ll be given a chance to message the person in real time, and meet in real time, or forever lose the opportunity to say hello in person.

See how 4 App works in this video.

4App – 4 Connecting Strangers from Yu Ji on Vimeo.

4 App is pending iOS app store release sign up here for updates.

ReStage: Stream Gao and Elena S.

Creating a community for events within the performing arts that are underserved

Stream and Elena are dance performing arts students who seek out the sub-genres of dance and the performing arts that are not well covered by the mainstream old guard media publications of New York. They both recognize the time and complexity involved in being an active fan and supporter of certain dance companies and other performing arts. They triangulate multiple websites, ticket sales sites, and are left to leave their own reviews in awkward places like TripAdvisor and Ticketmaster. Stream and Elena envision a supportive app-based community that supports dance performance companies, and creates a place for performing arts enthusiasts to quickly uncover emerging companies, and support a more diverse ecosystem of the arts.

Follow Stream’s work as a digital performance artists on her website.

Feel.me: Oryan Inbar, Chang Liu

Emotional interpretation of your chats and messages – bring back what we’ve lost – from body language, tone of voice, to the rhythm of words.

Oryan and Change speak English as a second language, and felt they had to learn text as a third language when they moved to NY. They spend most of their time communicating to friends and family through chat and messaging apps, and seek to find a better way to express themselves and understand how their messages are received. Feel.me is an app that uses color as the background message buble to express emotions as the new text interface. Over time, you will be able to look back and graphically visualize relationships to see how the pattern and behaviors emerge.

Oryan and Chang are first year students moving into their second year, and they plan to further explore their early prototype.

Keep in touch with Oryan and Chang on their websites.

Self Assembly Architecture Toys: Alejandro Puentes

Complex concepts and systems learned through playful encounters

Alejandro grew up on Tinker Toys, then Legos, and became an architect. At ITP he became interested in design for self-assembly and systems thinking, and he developed multiple prototype design tools to understand how these systems work. See Alejandro’s mesmerizing fractals self assembling in a bowl:

Alejandro will explore creating these design building blocks for the STEM learning market, selling to parents and educators who want children to explore concepts not easily taught within existing disciplines of thought: complexity, anti fragility, systems thinking, and self-organizing systems. As Alejandro would say – the FUTURE of EVERYTHING.

Stay in touch with Alejandro’s progress on his website.

A huge thanks to our supportive investor critics this year: Adaora Udoji, Ryan Jacoby and Frank Rimalovski.

Thanks all who came to our fifth annual ITP Pitchfest, our mentors this year John Bachir and Michael Krasnodebski, and to ITP for promoting and sponsoring, our mentors John and to the NYU eLab for hosting us.

 

NYU ITP Pitchfest Workshop 1

June 1: 2015

Why we do this

Get an audience outside of the cozy world of ITP Thesis feedback

Respond to genuine interest from investors

Help you understand how to launch ideas that just need to exist in the world

Which means we’ve expanded our aim – we are not just seeking high growth, high scale companies.

We welcome everyone that has a compelling concept

What we need from you

Purpose.

Know why you are driven to do this.

Motivation.

Know what drives you? Are you trying to control your own destiny? Or build the biggest thing that you can build? Or pay off your loans as soon as possible?

Vision. Vision First.

If it is clear enough and compelling enough it will attract the right people and resources.

If it is clear enough and compelling enough AND BIG ENOUGH it will attract the SCALE AND IMPACT-SEEKING people and resources (VCs, angels, future partners and team members)

 

How we get ready

 

June 1: First pitch. No visual aids. Concept review.

June 8: Purpose

June 15: Business model fun

June 17: PITCH

Whether or not you are seeking a scalable opportunity – spend the next few days going over investor pitch deck recommendations:

Sequoia

Cooley Co

Polaris (links to the first Foursquare pitch)

New York Angels Criteria

For lots of examples PitchEnvy

All will require you to know who your customer is. Talk to 10 per week for the next 2.5 weeks. (25 total). If you do not know how to do this, read Talking to Humans. It’s free.
Inspirational: Two Dots a Year Later

“What’s particularly great about the increase in revenue, is our team found a way to make money while sticking to our values, ensuring we’re always keeping our players’ interests and overall “fun” of the game front and center. Instead of looking for a quick win, we’re working to build our business and revenue responsibly by adding content and features that players (hopefully) find valuable enough to buy.”

Selling Science: Applying Lean at the NSF I-Corps

Published at the NYU Entrepreneurs Blog Part 1 and Part 2. —

Lessons Learned at the NSF’s I-Corps for Learning program:

“Parents didn’t even know what STEM was, nor STEAM!” exclaimed a conference participant.

Similar concerns could be heard from many of the academic and entrepreneurial educators this April, streaming out of the San Francisco Marriott after their first few days in windowless meeting rooms and actually talking to parents – their potential customers.

These would-be entrepreneurs were all grantees participating in a two month-long funded Lean LaunchPad course, developed by Steve Blank and run by the National Science Foundation (NSF) under the Innovation Corps for Learning (NSF I-Corps L) program. The goal of the program is to vet their educational ideas for sustainability and/or scale.

Lean methods have been embraced as a near religion in some startup circles, and is perceived to be the ideal method for driving potential unicorn-sized high growth market opportunities. Now the NSF is banking on Lean LaunchPad for social impact ideas to find their greatest impact.

The goal of NSF I-Corps for Learning is to foster entrepreneurship that will lead to the commercialization, greater scale and impact of STEM education, and learning innovations. The limited adoption and quality of STEM education is considered a crisis by the Committee on Science, Technology, Engineering and Mathematics Education under the National Science and Technology Council (NSTC). In response, the NSTC has developed a five-year strategic plan to address the US’s low ranking in STEM education and lack of skilled STEMdino workers.

I attended the NSF’s I-Corps L program as a mentor on an NYU team – Cognitive Toy Box – as I was curious to see how Lean LaunchPad works on social impact challenges.

I’ve participated in the adoption of the Lean LaunchPad method within NYU. NYU’s Entrepreneurship Institute has been a lead proponent of adopting Lean LaunchPad curricula in the Summer LaunchPad accelerator and supporting educators across NYU to prototype the course. I have had the privilege of teaching the first for-credit class at NYU at Tisch’s ITP program in 2014, which continues this year as we support a new batch of student teams to find their market potential.

There are a number of parallels in how the NSF teaches Lean LaunchPad and how we have adopted the curricula at NYU ITP. Because ITP is an engineering school in an art school, students are encourage to explore pre-commercial ideas and often struggle when they start to think of their concepts, projects, and potential businesses.

Most of the teams participating in NSF I-Corps L program faced a similar struggle – did their idea have the potential to be a scalable business, or even deliver a sustainable source of recurring revenue? What organizational structure would best propel their educational innovation? Where should they focus their efforts so that their innovation could achieve maximal social impact? Does the team have what it takes to pursue their innovation? While these questions may seem crazy to a Bay Area creator of the next wearable, dating app, or cloud-based big data analytics solution, they are deeply relevant to educators who are motivated not by profit potential, but by educational impact.

Part 2:

Customer Discovery Divines Sustainable vs. Scale Potential

In the first week indoctrination to Lean LaunchPad, the 24 teams in I-Corps L were encouraged to change their approach for how to scale curricula and teaching method innovations, under the relentlessly direct feedback of fellow Ed-Tech entrepreneurs, VCs, NSF advisors, and the Lean LaunchPad creators, Steve Blank and Jerry Engel. Each team, a triad consisting of an academic principal investigator, an entrepreneurial lead, and a mentor, were charged with taking their initial learning innovation and finding customers – fast. “Get out of the building” to discover potential customers.

The Customer Discovery approach is well suited to answer the question of scalable vs. sustainable. Most academic educators share the same bias as tech founders who fall in love with their solution without ever talking to more than a few potential customers. Customer Discovery forces the team out of the comfort zone of academic hierarchy and challenges the egos of the team, who are deeply humbled when they first try to sell their solution.

Almost every team had defined the STEM crisis as the “hair on fire” problem they were motivated to solve, and were shocked to learn a quick sample of parents at Union Square in SF, or the Exploratorium museum, had never heard of STEM or STEAM. The creators of an after school STEM curricula learned that a highly educated high income parent would pay a premium for these kinds of programs, but then the educators were disappointed that launching with this segment would delay their ability to reach students of all incomes.

Those teams that were successful in repositioning their value proposition to appeal to a potentially larger addressable market were on to a more scalable innovation. For example, a number of after school curricula creators learned that they shouldn’t be headlining their value proposition with the STEM crisis. After deeply listening to families of all incomes and educational advancement status, they learned that there were common themes for how parents described their deepest needs. More important than science, or design thinking, or engineering methods, these parents want the benefits these methods have to offer.

Parents want their children to develop team-building skills, collaboration skills, discovery and joy in learning, and reduce their fear of failure.

There is a huge addressable market in a society that seeks these outcomes. Recasting the value proposition based on these outcomes of learning, rather than the curricula itself, worked to expand the market.

Other teams confirmed potential sustainability rather than scalability. Defining how a certain curriculum or program could replicate within a local school system, or to other school systems. While these project teams were unlikely to see a hockey stick style growth curve in their future, they are well equipped to envision how their innovation can move beyond their initial experiments.

At the end of the program, the NSF has a particularly open stance to what becomes of the project team innovations.

The outcomes of the projects are expected to be:

  • A clear go-no go decision concerning the viability and effectiveness of the learning oriented resources/products, practices and services
  • An implementation “product” and process for potential partners/adopters
  • A transition plan to move the effort forward and bring the innovation to scale.

The prize for participation for academic entrepreneurs is high: The I-Corps programs feed the popular NSF Small Business Innovation Research and Small Business Tech Transfer Programs (SBIR and STTR), and successful businesses can earn multiple non-dilutive grants that rival seed or Series A investments.

NSF is very comfortable telling STEM educator / entrepreneurs that it’s ok to fail once you’ve gathered enough evidence that your project isn’t viable. At the start of the program, teams were assured that a decision to not continue a program is completely acceptable. Teams move to no-go when they learn the steep uphill climb it would take to scale their innovation, because they are too early, there is too much competition, or they are not cost effective enough to deliver in the current market environment. Teams also choose no go when the individuals involved decide that entrepreneurship is just not their calling.

What I learned from the experience in the end: parents want for their children what the NSF wants from educator entrepreneurs: learning how to take risks, collaborate, and reduce our fear of failure, and the joy of discovery.

 

NYU ITP Pitchfest 2015

Workshop Series: What is your concept. Your idea. Your project. Pitch your Idea  for support and feedback: Workshops, Practice Pitch Prep, and Pitch Festival.

Adjunct Professor: Jen van der Meer

Background: Over the past five+ years NYU ITP has organized increasingly successful Investor Pitchfest to showcase startup team ideas worthy of funder consideration and attention. Prior Judges for Pitchfest have included Joanne Wilson and Fred Wilson (Union Square Ventures), Andy Weissman (Union Square Ventures), Phin Barnes (First Round Capital) and Frank Rimalovski (NYU Tech Ventures), Amy Millman (Springboard) and a number of active Angel Investors.

This year we are augmenting with more super sub micron seed stage investors, project funders, and social impact angels.

We schedule the workshop series after Thesis Week and the ITP show.

In the past five years, there are now so many more opportunities to pitch.

The Stern Berkeley Center Competition, The NYU Summer LaunchPad Accelerator, the Dorm Room Fund, the application process for YC and Highway 1 and other accelerators in NYC, the Bay Area, and China.

But we know there are those out there that haven’t yet ventured into thinking about their idea, project, or concept as a venture.

We have also augmented the prep workshops for the range of potential ideas we’ve seen at ITP over these years:

  • The projects that just need to exist in the world.
  • The social impact idea that must find its home.
  • The high growth potential company that hasn’t yet gotten picked up by an accelerator.
  • We welcome all of you. We want to help you launch.

Submit your business concept ideas to be considered for the first workshop, and Pitchfest here, and reach out to Jen at jd1159@nyu.edu with any questions or for consultation. This workshop is open to anyone who is enrolled or has recently been graduated from NYU, and is designed for NYU ITP graduates specifically.

 

Workshop Schedule Overview:

Idea Submission: Friday May 22, 2015

Workshop 1: Monday June 1, 2015

Workshop 2: Monday June 8, 2015

Workshop 3: Monday June 15, 2015

Pitchfest 4: Wednesday, June 17, 2015

Idea Submission: Friday, May 22, 2015

 

Students will submit a 100 word description of their idea. Links to team member bios, early prototypes, presentations, blog posts, or video demos is welcome and encouraged. Professors van der Meer, Igoe and Hechinger will select top student ideas for the initial workshop.

  Continue reading

Favorite Lessons Learned from Lean at ITP Speakers

We just wrapped up our second Lean experiment at ITP last night with a Lessons Learned dinner party.

We had extraordinarily candid speakers this semester who humbly told us of their successes and failures, pivots and turnarounds, origin stories and the truth behind their funding and scale.

A few of my favorite wisdom pickings from the line up of guest speakers:

Britta Riley: Know the contours and flows of the dominant business model in your industry. Know the limits of direct e-commerce sales if you are selling hardware and how retail happens. Don’t deliberately limit your business by not understanding these parameters going in.

Albert Lee, All Tomorrows Lab who recently launched Emoji App:

Zero mental calories: users should have to learn nothing when they use your app. Nothing.

Toothbrush test: can you find a reason why they would use your app 2x a day, to create those reasons to engage.

Trojan Horse it: you can’t always give people what you think they need, especially if you are meeting a need they are uncomfortable talking about. So find out what their discrete top level painpoint is, and create the front door that meets that need. You can solve for deeper emotional needs not at the value proposition level, but in the product design. **** (This one gets extra stars)

Julie Berkun Fajgenbaum, Tweed Wolf. Come up with the 10 reasons why it won’t work and then develop tests to prove the contrary.

Chris Milne, IDEO: Design it so it looks unfinished – and people will give you more honest and useful feedback because they will not feel like they are hurting your feelings. They will truly co-create with you.

John Bachir, Medstro: Kill Features!

Christine Lemke, Evidation Health: Be comfortable with pivoting between consumer and B:B, and don’t get too attached to what the actual product is on either side – your strengths in one will benefit you for the other.

Angad Singh, Lolly Wolly Doodle: When you are in scale mode and hiring developers, learn to work together before hiring. Determine a project that you estimate to be about 20 hours over 2-3 weeks, and then assess not just coding skills but problem solving, decision making, and communication skills.

Scott Miller, Dragon Innovation and Bolt Ventures: Learn how to pick a factory, and validate that your project could succeed through crowdfunding or preording before you begin.

Lean at NYU ITP

Starting next Monday – (one week defer thanks to the blizzard) – an open invitation to any entrepreneur, funder, or advisor to startups to visit our Lean class at ITP.

This year we focus not just on lean but on the actual efforts required to develop a product to MVP – and the students will all launch a business while still in school.

Syllabus For Lean at NYU ITP

Instructors: Jen van der Meer, Josh Knowles
Days and Times: Mondays, 6:30 PM-9:00 PM
Location: ITP NYU 721 Broadway at Waverly, 4th Floor Room A/B
Text: Business Model Generation

We embrace a creative, iterative, and collaborative approach to making things — but launching a product out into the world takes a somewhat different set of skills. How does one make sure people want to use what they make? How does one create a business plan to support the idea? Is the idea strong enough to turn into a job — or a career? Enter Lean LaunchPad, at NYU ITP – the experiential course in entrepreneurship.

Based on Steve Blank’s Lean LaunchPad and the NYU Summer LaunchPad Accelerator, we are applying the curriculum developed at Stanford and Berkeley for the NYU community. This course has been developed with support from the NYU Entrepreneurship Initiative, and aims at mixing the best of the methods from the Lean LaunchPad methodology with the best of ITP’s methods. Over the spring semester, student teams participate in an iterative approach to startup development, a combination of business model design + customer development + agile development.

Alexander Osterwalder’s Business Model Generation is used as the basic framework for business model development, and we utilize UX methods and tools to ground students in an understanding of how to successfully move through the early stages of product development. Students work in self-formed teams of 3-4 to develop their business model and product/service over the course of the semester. The primary focus of the course is the work of customer development, speaking directly to potential customer to help define opportunities that the startup is designed to solve, and early stage product development. The ITP curriculum will augment the LeanLaunchpad method with additional approaches from design thinking, UX, and ethnography to accelerate the understanding of both explicit pain points and more latent or hidden challenges that people face, in their jobs and their lives.

Learn more on the class blog and contact me if you want to advise, mentor, or tell your story.