Lean Startup and Natural Enterprise

The Lean Startup concept (Steve Blank and Eric Ries) is based mostly on their attempts to understand why they, and others like them, were successful business managers and inventors—eventually. The Lean Startup concept doesn’t just apply to small business starts, it applies to enterprising behaviour wherever it is recognised and with the diagram below I hope to show how and why.

Lean StartUp is radical, even anarchic, becuase 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 the natural a form of human behavior associated with doing good for others.

What does getting out of the building mean? In the context of Lean Startup 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 try to capture  the process Steve Blank calls the Customer Development Process, but which turned out to be much more significant (in my view anyway), because it explains a whole lot more.

E=MC3 feat sol

This is the diagram that led to the formula Enterprise equals managing times conversation cubed. It features three conversations. The first opens up with the search for a problem to solve, or with recognition that someone has a problem that you would like to solve for them. This is the fundamental step in doing good and being enterprising, but as we see elsewhere here, it does not necessarily have to start with a problem, it could start with recognition that someone is pleased or exciting by an event, or something that is done to them. Say, for example, someone enjoys eating the cheesecake you made so much that they invite you to make another, and then another, and then another. The solution to pleasing them again, and again, and again, is more of your cheesecake. You might, then, think of starting a cheesecake bakery.  Whether initiated by a negative emotion or a positive one, this is conversation 1. An organisational entity will emerge from it, be that an informal network, or a formal system that becomes a business emerges from this conversation.

The diagram uses the systems dynamics convention, also known as stock-flow diagramming, or cause-effect diagramming, made fashionable by Peter Senge in his book The Fifth Discipline.  Each circle represents a stock or an entity in the process of transformation. Transformations are about adding things to (like knowledge), or taking them away from what exists, but not so far as the entity is destroyed. 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 useful to realising a ‘good.’  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 will eventually 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. In effect, the solution also serves to lock-in everyone involved, that is, all those who have a stake in the delivery of good.

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  reflect the structure of Osterwalder’s Business Model Canvas, and 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.

If we were wishing only to promote employability, then this model of enterprise still stands. Intrapreneurship is about looking for opportunities to do good for an employer.

Advertisements

One thought on “Lean Startup and Natural Enterprise

  1. Pingback: Managing to do good | The science of enterprise—and doing good.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s