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Here you’ll find all the tips, techniques and best practices that entrepreneurs need in their quest to build successful companies —packaged to suit your startup team’s particular path
“Get Out of the Building!” The Startup Owner’s Manual™ The Step-by-Step Guide for Building a Great Company by Steve Blank and Bob Dorf Copyright © 2012 by K and S Ranch Inc., K&S Ranch Publishing Division The Startup Owner’s Manual™ TM 2012 All Rights Reserved This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional services If legal advice or other expert assistance is required, the services of a competent professional person should be sought All rights reserved No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval 5/2287 system, without permission in writing from the publisher For permission to copy of any part of the work, contact: info@kandsranch.com Published by: K&S Ranch Press, div K&S Ranch, Inc 4100 Cabrillo Highway, Pescadero, California 94060 Visit our website at www.steveblank.com to contact K&S Ranch, email info@kandsranch.com Library of Congress Cataloging-in-Publication Data ISBN: 978-0-9849993-7-8 Book design by Karrie Ross, www.KarrieRoss.com First Edition: September 2012 6/2287 QED stands for Quality, Excellence and Design The QED seal of approval shown here verifies that this eBook has passed a rigorous quality assurance process and will render well in most eBook reading platforms For more information please click here About this Book Welcome to The Startup Owner’s Manual ebook Here you’ll find all the tips, techniques and best practices that entrepreneurs need in their quest to build successful companies — packaged to suit your startup team’s particular path This e-book organizes The Startup Owner’s Manual into three e-books to better help you navigate the text In short: • Book 1: The Strategy Guide provides background on, and an overview of the Business Model and Customer Development processes 8/2287 • Book 2: The Web/Mobile e-book provides all the step-by-step process detail you’ll need to create a solid, sustainable startup doing business in the web/mobile channel, and • Book 3: The Physical Channel ebook offers the same for startups using physical channels For best results, start your reading with the Strategy Guide The Startup Owner’s Manual Strategy Guide makes up the first third of the ebook It provides an overview of why startups are not smaller versions of large companies; explains how startups search for a business model using Customer Development; and details the overall customer development methodology, and key implementation steps 9/2287 For companies with virtual distribution channels, The Startup Owner’s Manual for Web/Mobile Channel Startups, the second part of the e-book, provides a similar detailed, step-by-step process and approach for startups that sell via the web or app stores channels, where things move faster, customers are abundant, and customer attention is always hard to get If you’re building a startup with physical distribution channels, you’ll want to turn to the third part of this e-book, The Startup Owner’s Manual for Physical Channel Startups This section provides detailed guidance, instructions, and examples on how to build a great company, step-by-step Included are details on how to get, keep and grow your customer base; checklists for tracking progress; and tools to help determine just how successful—or not—you can be 10/2287 We believe the Startup Owner’s Manual can help you increase your odds of finding customers, a market, and product/market fit Now, as we say, “get of the building!” And best of luck with your startup Steve and Bob 2273/2287 teach entrepreneurship None of these classes would have worked without the teaching assistants who kept the wheels on over the years, most notably Ann Miura-Ko, Thomas Haymore, Bhavik Joshi, Christina Cacioppo, and Eric Carr Besides the schools where I regularly lecture, other universities have invited me to teach, lecture and learn Big thanks to: Professor Cristobal Garcia and the Pontificia Unversidad Catolica de Chile, in Santiago; Dave Munsen, dean of engineering, and Thomas Zurburchen, associate dean of entrepreneurship at the University of Michigan; Professor Nathan Furr of Brigham Young University, who turned my notion of business model competitions (instead of business plan competitions) into the first formal contest; at Aalto University in Helsinki, Finland, Tuula Teeri, president, Will Cardwell head of the Center for Entrepreneurship, and Kristo Ovaska and Linda Liukas, who all welcomed 2274/2287 me; and Professor Tom Eisenmann of Harvard Business School’s Entrepreneurial Management Unit, with whom I compare notes and teaching strategies in a semi-annual gettogether Stephen Spinelli was at Babson when he was part of the team that taught me how to teach entrepreneurship, and when he became president of Philadelphia University, he gave me something I didn’t deserve Carl Schramm at the Kauffman Foundation turned into a friend in the pursuit of a new way to think about entrepreneurial education Numerous authors have written extensively (and more coherently) about each of the four steps of Customer Development I cover A good many of the building blocks of Customer Development were first articulated by Eric Von Hippel (the Lead User), Rita Gunther McGrath and Ian MacMillan (Discovery-driven Growth), Mary Sonnack, 2275/2287 Michael J Lanning, Michael Bosworth (Solution Selling), and Thomas Freese, Neil Rackham, Mahan Khalsa, Stephen Heiman, and Charles O’Reilly Technology Life Cycle Adoption was developed by Joe Bohlen, George Beal and Everett Rogers and popularized by Geoffrey Moore Market Type is an extension of the brilliant work of Clayton Christensen W Chan Kim and Renee Mauborgne’s work on Blue Ocean Strategy was a later influence on this edition of the book A formal process of dealing with the chaos and uncertainty of a startup (and the company-building strategies) owes a tremendous amount to the theories of John Boyd and the OODA Loop Frank Robinson independently came up with many of the concepts in the Customer Discovery and Validation long before I wrote about them Frank coined the term minimum viable product I liked it better than minimum feature set, which I used in the first book 2276/2287 My partner and co-author, Bob Dorf, put up with more than any co-author could imagine His contribution is matched only by his patience A seasoned entrepreneur himself, Bob’s success as a serial entrepreneur and his strengths in sales, marketing, and the Web have added immensely to our new joint work I met Bob when he walked into my E.piphany office My startup had five people aboard, and his had about a dozen I bought his sales pitch, and he helped me launch E.piphany’s customer development and promotion efforts In 2010 he practically moved into my ranch and became my partner for the second time, helping to make The Startup Owner’s Manual a work we’re both proud of The “get/keep/grow” sections and “metrics that matter” were his painful labor of love Terri Vanech, our researcher/copyeditor, had to deal with both of our unreasonable demands 2277/2287 Thanks to our intrepid reviewers: Entrepreneurs Jake Levine at News.me; Ross Gotler; Peter Leeds at Gabardine.com; Steve Weinstein of MovieLabs; Preston Bealle and Prescott Logan at GE’s Energy Storage Technologies; venture capitalists Jon Feiber of MDV, Ann Miura-Ko at Floodgate, John Burke from True Ventures, Mike Barlow of Cumulus Partners, Takashi Tstusumi from Mitsui Sumitomo Ventures and Errol Arkilic at the National Science Foundation Their comments made the book substantively better by imbuing it with their hundreds of years of collective wisdom Finally, my wife Alison Elliott who not only put up with my obsession with finding a methodology for early-stage startups and my passion for teaching entrepreneurship, but also supported me with her wise counsel and insight (along with numerous edits) which added clarity to my thinking This book would not have happened without her About the Authors Steve Blank A RETIRED ENTREPRENEUR, EIGHT-TIME SERIAL Steve’s insight that startups are not small versions of large companies is reshaping the way startups are built and how entrepreneurship is taught His observation that large companies execute business models, but startups search for them, led him to 2279/2287 realize that startups need their own tools, different than those used to manage existing companies Steve’s first tool for startups, the Customer Development methodology, spawned the Lean Startup movement The fundamentals of Customer Development are detailed in Blank’s first book, The Four Steps to the Epiphany (2003), which together with his blog, www.steveblank.com, is considered required reading among entrepreneurs, investors and established companies throughout the world Blank teaches Customer Development and entrepreneurship at Stanford University, U.C Berkeley Haas Business School and Columbia University, and his Customer Development process is taught at universities throughout the world In 2011, he developed the Lean LaunchPad, a hands-on class that integrates Business Model design and Customer Development into practice 2280/2287 through fast-paced, real-world customer interaction and business model iteration In 2011, the National Science Foundation adopted Blank’s class for its Innovation Corps (ICorps), which trains teams of the nation’s top scientists and engineers to take their ideas out of the university lab and into the commercial marketplace Steve is a prolific writer and speaker who enjoys teaching young entrepreneurs In 2009, he earned the Stanford University Undergraduate Teaching Award in Management Science and Engineering In 2010, he earned the Earl F Cheit Outstanding Teaching Award at U.C Berkeley Haas School of Business The San Jose Mercury News listed him as one of the 10 Influencers in Silicon Valley Despite these accolades and many others, Steve says he might well have been voted “least likely to succeed” in his New York City high school class 2281/2287 Eight Startups in 21 years After repairing fighter plane electronics in Thailand during the Vietnam War, Steve arrived in Silicon Valley in 1978, and joined his first of eight startups These included two semiconductor companies, Zilog and MIPS Computers; Convergent Technologies; a consulting stint for Pixar; a supercomputer firm, Ardent; peripheral supplier, SuperMac; a military intelligence systems supplier, ESL; Rocket Science Games Steve co-founded startup number eight, E.piphany, in his living room in 1996 In sum: two significant implosions, one massive “dot-com bubble” home run, several “base hits,” and immense learning that resulted in The Four Steps to the Epiphany An avid reader in history, technology, and entrepreneurship, Steve has followed his curiosity about why entrepreneurship blossomed in Silicon Valley while stillborn 2282/2287 elsewhere It has made him an unofficial expert and frequent speaker on “The Secret History of Silicon Valley.” In his spare time, Blank is a Commissioner of the California Coastal Commission, the public body which regulates land use and public access on the California coast Steve served on the boards of Audubon California, the Peninsula Open Space Land Trust (POST), and was a trustee of U.C Santa Cruz and a Director of the California League of Conservation Voters (CLCV) Steve’s proudest startups are daughters Katie and Sarah, co-developed with wife Alison Elliott Bob Dorf BOB DORF FOUNDED HIS FIRST SUCCESS AT AGE 22 and, since then, six more—“two homeruns, two base hits, and three great tax losses in all,” as he puts it He’s advised and/ or invested in at least a score more startups since Dorf is often called the “midwife of Customer Development,” having been among the first to help Steve Blank deploy it when Steve’s eighth startup, E.piphany, opened its doors with five employees in 1996 Bob’s sixth startup, Marketing 1to1, 2284/2287 helped E.piphany engage its very first customers He later critiqued the early versions of Steve’s Four Steps to the Epiphany mercilessly along the way, and they’ve been friends and colleagues ever since When Bob and Steve aren’t writing, Bob runs the K&S Ranch consultancy Bob’s deep experience consulting to Fortune 500 companies and in online marketing balance Steve’s VC and software-centric experience Bob teaches a full-semester course at Columbia Business School, “Introduction to Venturing,” on Customer Development and getting startups right Entrepreneurial from the age of 12, Bob received his last W-2 almost 40 years ago, when he quit his editor’s job at New York’s WINS Radio to launch his first startup Dorf+Stanton Communications, founded in his living room, grew from a staff of two—Bob and a St Bernard—to 150+, when Bob sold it 2285/2287 in 1989 He’s counseled dozens of nonprofits probono on “donor development,” as well Bob co-founded Marketing 1to1 (later Peppers & Rogers Group), an early CRM strategy firm, and drove its growth to 400+ people worldwide As founding CEO, Dorf spearheaded major strategic customer programs at a veritable “who’s who” of companies including 3M, Bertelsmann, Ford, HP, Jaguar, NCR, Oracle, and Schwab He’s spoken before scores of U.S and international audiences, and published dozens of articles including an indepth Harvard Business Review treatise Dorf lives in Stamford, Connecticut, with his wife Fran, a therapist and thricepublished novelist His proudest startup by far is daughter Rachel, a psychologist who recently co-founded Bob’s first grandchild, Maya Rose Gotler It’s not the beginning of the end, but it is perhaps the end of the beginning @Created by PDF to ePub ... a Web Startup: A Simple Overview The Startup Owner’s Manual for Web/ Mobile Channel Startups Index The Startup Owner’s Manual for Physical Channel Startups Title Page The Startup Owner’s Manual. .. Proceed? The Startup Owner’s Manual Strategy Guide Index The Startup Owner’s Manual for Web/Mobile Channel Startups Title Page 13/2287 The Startup Owner’s Manual for Web/ Mobile Channel Startups... offers the same for startups using physical channels For best results, start your reading with the Strategy Guide The Startup Owner’s Manual Strategy Guide makes up the first third of the ebook