Steve Blank, Part 2 of 2
Steve Blank, lecturer Haas School of Business UCB. He has been a entrepreneur in Silicon Valley since the 1970s. He has been teaching and developing curriculum for entrepreneurship training. Built a method for high tech startups, the Lean LaunchPad.
Speaker 1: Spectrum's next.
Speaker 2: Okay. Okay.
Speaker 1: Welcome to spectrum the science and technology show on k a l x Berkeley, a [00:00:30] biweekly 30 minute program bringing you interviews featuring bay area scientists and technologists as well as a calendar of local events and news.
Speaker 3: Hello and good afternoon. My name is Renee Rao and I'll be hosting today's show. Today we present part two of two interviews with Steve Blank. I lecture at the High School of business at UC Berkeley. Steve has been a serial entrepreneur in silicon valley since the late 1970s in the early two thousands he retired from the day to day involvement [00:01:00] of running a company. He has been teaching entrepreneurship training ever since. By 2011 he was said to have devised a scientific method for launching high tech startups, dubbed the lean launchpad. The National Science Foundation caught wind of this and asked Steve to build a variation for teaching scientists and engineers how to launch startups. In 2013 Steve partnered with UCLA and the NSF to offer the lean launch pad class for life science and healthcare. In part two, Steve Talks about getting [00:01:30] the NSF lean launch pad classes going, the evolution of startup companies and innovation, and now Brad swift continued his interview with Steve Blank.
Speaker 4: Okay.
Speaker 5: In your experience with these scientists and teaching them, are these people self selected? They're the ones who are anxious and eager and there are other scientists maybe back in the lab are reluctant afraid of the process.
Speaker 4: So just the personality of it. Yeah, so this goes back to the comment I made earlier about entrepreneurs being artists. It was the implicit comment [00:02:00] I just kind of both through in the beginning, but as important is that you can't assign entrepreneurship as a job, right? If you really think about them, you can't split up a room and say, those of you on the left, you're going to be musicians. And those are you on the right, you're working on the assembly line like, Oh yeah, WTI. I mean, it doesn't work. It doesn't work like that. All right. Entrepreneurship is a calling. Just like art, just like music, just like writing is something you have to passionately want to do, but much like art, we've learned something [00:02:30] a couple hundred years ago that very early on in people's lives in elementary school and junior high school in high school, we want to have our depreciation.
Speaker 4: They're not intensive classes, but their exposure to art that people might not know their artists. They might not know they have a passion to paint or to sculpt or to write or to entertain. I will contend because entrepreneurship is an art. We actually need those type of classes early on because scientists didn't understand [00:03:00] that not was their passion to invent and create. They might actually have an equal passion to wait a minute, I actually want to take this thing all the way through when I want to see what happens. If hundreds of thousands of people were being affected by this medicine, not just, here's my paper in the latest publication. It doesn't mean everybody could do that, but it means we've not yet gotten the culture to where we could say, well is this something that kind of excites you? And I think we're getting better to understand what it takes to do that.
Speaker 4: Would you have any [00:03:30] idea what that would look like? The kind of exposure that you would be talking about in grammar school or Middle School? Sure. It turns out one of the unintended consequences of teaching the scientists that National Science Foundation is, remember their professors, almost all of them tenured running labs and universities across the country. And so here they take this class from the national science foundation and about half or two thirds of them now go back to their own universities, pissed cause they go, how come we're not teaching this? And so what happens is the National Science Foundation asked [00:04:00] me and Jerry Angle, who was the head of entrepreneurship at Haas, why don't you guys put on a course through a nonprofit called NCIA to teach educators in the United States who want to learn how to teach this class. And so we teach the lean launchpad for educators. We teach now 300 educators a year.
Speaker 4: One of the outgrowths of that class was entrepreneur educators from middle school and high school started showing up and I went, you're not really teaching this to kids. They went, [00:04:30] oh Steve, you should see our class. And I went, oh my gosh, this is better than I'm doing. So they'd taken the same theory and they modified the language. So it was age appropriate. And so the two schools that had some great programs were Hawkin school outside of Cleveland and Dunn's school here in California. And in fact they're going to hold their own version of the educator class in June of 2014 for middle school and high school educators who were interested in teaching this type of entrepreneurial education. So I think it's starting to be transformative. I think we [00:05:00] have found the process to engage people early and not treated like we're teaching accounting to do, treating it like we're teaching art.
Speaker 4: And again, we're still experiment thing. I wish I could tell you we got it now. I don't think so. I think we're learning, but the speed at which we're learning through it makes me smile. That's great. It is great. The Passion of the educators really is exciting. And Are you able to teach us remotely so that scientists from around the country don't have to come to you and sort of stop what they're doing? I was teaching the class [00:05:30] remotely. It's now taught in person in multiple regions. So that's how we solved that problem. But my lectures were recorded and not only were they recorded, they were recorded with really interesting animation. So instead of just watching me was a talking head. These are broken up into two minute clips and it's basically how to start a company and it's on you udacity.com so if you want to see the lean launch pad class in the lectures, it's on your udacity.com it's called the p two 45 but by accident we made these lectures public to not only the [00:06:00] national science foundation scientists, but we opened it up to everybody.
Speaker 4: And surprisingly there is now over a quarter million people have taken the class. I've had people stop me at conferences and have told me that the Arabic translation, which I didn't even know existed, it's the standard in the Middle East. I had people from Dubai and Saudi Arabia in Lebanon literally within 10 feet go, oh well we recognize you. And I went, who are you turning over, Mr Blank, you worthy? I went, what's going on? I laugh not because it's me, but because [00:06:30] this is the power of the democratization of entrepreneurship. I have to tell you a funny story is that I grew up with the entrepreneur cluster was silicon valley and something in the last five years that I've gotten to travel with both Berkeley and Stanford and National Science Foundation to different countries to talk and teach about entrepreneurship. And my wife and I happened to be on vacation in Prague and when I really knew the world had changed as my wife had said, you know Steve, we're kind of tired of eating hotel food.
Speaker 4: I wonder if there were ending entrepreneurs and Proc, I didn't want to, I [00:07:00] don't know. You know, let me go tweet and any entrepreneurs and Prague, you know, looking for a good check. Brie hall and hour and a half later we're having dinner with 55 entrepreneurs and Prague television is there and they said, Steve, you don't understand. Here's why. Here's an entrepreneur community everywhere. The only thing we still have unique in the bay area is that entrepreneurship and innovation. We've become a company town. That is our product. Much like Hollywood used to be movies in Detroit used to be cars in Pittsburgh steel. [00:07:30] While obviously there are people who do other stuff, teach in restaurants, put the business. The business to the bay area really is entrepreneurship and innovation. While we tell stories about the entrepreneurs, the unheralded part of that ecosystem is that we have equally insane financial people.
Speaker 4: Why Silicon Valley happened was that the venture capitalist in the 1970s in Boston when it wasn't clear whether it was going to be Boston or Silicon Valley to be the center of entrepreneurship, the venture capitalist in Boston continued to act [00:08:00] like bankers, venture capitalists in Silicon Valley. They decided to act like pirates and the pirates want and so what really differentiates the observational make with an entrepreneurship is everywhere in the world. Entrepreneurial clusters only happen when all these things, these components, primarily entrepreneurs, but a heavy dose of risk capital capable of writing not only small checks but large checks and doubling and tripling down on startups. That's why you have the Facebooks and the googles and the twitters [00:08:30] around here. You also have a culture let's people know and understand. In the 1950s and sixties people came to San Francisco and Berkeley to live an alternate personal lifestyle, but they were hitting 30 miles south to have an alternate business lifestyle around Stanford and it was this kind of magic combination of great weather, the ability to do things in both business and your personal life that you couldn't anywhere else. These cultural phenomenons actually were and under appreciated until a very smart professor at Berkeley [inaudible] [00:09:00] wrote a book called regional advantage that actually described a lot of these things and open my eyes about why this region actually won.
Speaker 1: You're listening to spectrum on k a Alex Berkeley. Steve Blank is our guest. He's a former entrepreneur and current lecturer at the High School of business. And the next segment he talks about how startups has changed since he first began in Silicon Valley in the 1970s
Speaker 4: is entrepreneurship then changed as a result [00:09:30] of that. What really happened was the harmonic conversion of a really interesting set of events. One is, is that if you think back on how startups worked in the, in the golden age of Silicon Valley in the seventies and eighties to build a startup required millions if not tens of millions of dollars, not to run it, but just to start it, you needed to buy computers, either mainframes or mini computers and then workstations. You needed to license millions of dollars of expensive software. The only venture people were either in [00:10:00] Boston or silicon valley and they lived on sand hill road and nowhere else, and therefore it was kind of a formal process and the cost of entry was literally millions or tens of millions of dollars. There was no other way to get computing. There was no other way to get money. The second is, we had no theory about startups.
Speaker 4: That is, there were no management tools at all. But what happened starting out of the rubble actually of the last Internet bubble, things change in technology in a way. I don't think people outside the technology business appreciate it off. Probably the biggest [00:10:30] one was actually generated by Amazon. It turns out Amazon created something called Amazon web services. And if you're a consumer, all you know is Amazon maybe for kindle and for sure for their books or their website. But if you're a programmer, Amazon has become the computing utility. You no longer have to buy computers from your laptop. You literally log in to hundreds of millions of dollars of computers and you have access to the world's largest computing resource ever assembled [00:11:00] for pennies, for pennies, and you don't need any storage. You're storing it all and online and all the computing. So number one, Amazon web services truly turned computing hardware and software into a pennies per gigabyte and MIPS, et Cetera, in a way that was unbelievable 10 years earlier.
Speaker 4: Two is that changed the cost of entry of an early stage venture. You no longer needed millions of dollars. In fact, if you were smart entrepreneur, you could start on your credit card and if you didn't have your credit card, maybe some friends and family, [00:11:30] and that started a very different wave because it changed venture capital. It used to be there were either doctors or dentists or other reform of venture capital firms like Kleiner Perkins and Mayfield and sequoia. But the fact is that now after a ton of entrepreneurs could start on their credit cards, they still didn't need $20 million. Maybe eventually they did, but they could just take $100,000 or half a million dollars and get pretty far. And that created a new class of super angels or angel investors [00:12:00] that just never existed before. Kind of this intermediate level. And so venture capital changed. And also with that change, it changed where they could be located.
Speaker 4: You no longer had to be located to be a investor in New York, Boston, or San Diego. Th that amount of capital could be available in the London or Helsinki or Estonia or Jordan, Beijing. Third is, and I will take credit for some of this, the invention of a new way to look and how to build these startups. It used to be that if you were building [00:12:30] a physical product, you would do something called the functional Spec or you'd get requirements from a customer. You build a specification and then you'd make an early version of the product called Alpha test, maybe a less buggy version called Beta test, which foist on some poor unsuspecting customers and then you'd have a party at something called first customer ship and that process was called waterfall development and from beginning to end typically took years and insight in the software business and Toyota had it even [00:13:00] earlier is that we could build products differently, we could build products incrementally and iteratively and that's called agile engineering and for startups, how you want to build your products is agily and iteratively because almost always what you believe on day one are all the customer features that they need.
Speaker 4: It's a pretty safe bet. You're not a visionary, you're actually hallucinating and that most of the features you would historically have built in go unused on needed and unwanted. But if [00:13:30] in fact you could actually test intermediate versions of the product iteratively and rapidly on those customers with a formal process which I invented called customer development, those two hand in hand change the speed and trajectory of how startups get built. And so now you see these startups coming out of nowhere and getting acquired in three years, but they have tens of millions of customer. Where did that come from? Well, in the old days we'd still be writing the software, building the hardware.
Speaker 6: Aw, it's [00:14:00] a public affairs show, k, a l X. Berkeley. Our guest is Steve Link a lecture at UC Berkeley's Haas School of business. The next segment, Steve Talks about his current work, trying to understand how innovation drives some companies and fails in others.
Speaker 4: If I can, the unintended consequence of all this stuff. Remember this whole lean startup stuff has become a movement by itself. Harvard business review contacts me and says, Steve, [00:14:30] every large corporation is now desperately struggling how to deal with continuous disruption in the 21st century. That is all the rules that worked in the 20th century, you know, be number one in market share, you know, like be number one and two, I mean all the Jack Welsh rules, you follow those who be out of business in seven years. Why, you know, globalization in China Inc Internet has made consumers flighty very little brand loyalty. Pricing is almost transparent. Cost of starting a new business is infinitely lower. All of the things [00:15:00] that made you strong in the 20th century as a corporation are no longer true. Some of them are obviously, but not really. And so every large corporation are trying to relearn a set of rules and guess where they're looking for, they're looking at startups of how do we be as innovative as apple as that.
Speaker 4: That is, the models are now silicon valley and other technology companies. And so my article, the lean startup changes everything became the cover of the Harvard Business Review and May, 2013 what was interesting is that I started [00:15:30] getting calls from executives whose titles I had never heard of before. It turns out almost every large company is now appointing a VP of corporate innovation. I had never heard of it. You know what's that? And when you go talk to them, and I've talked to a bunch of them, now you find out that they're all struggling to solve this continuous disruption problem by trying to build innovation inside the DNA of large corporations in the u s and overseas and the first sign of companies [00:16:00] trying to do that is appointing somebody typically as a corporate staff person to have some kind of internal incubator. I could politely say, that's a nice first step put it really doesn't solve the problem.
Speaker 4: It actually just points out what the problem is and can I digress for another 10 seconds? It turns out that the problem that corporations are having is not a tactical organizational problem. The things I described, the globalization, the effect of the [00:16:30] Internet, et Cetera, are just strategic problems that every corporation is facing. The last time companies faced something, this major was in the 1920s, uh, u s corporations grew from small mom and pop businesses from the 1870s to 1920s and they kind of came up with a form of organization called functional organizations, meaning you had a head of sales, a head of marketing, a head of manufacturing, but by function that was the only way companies were organized. But by 1920, some [00:17:00] u s corporations spans from New York to San Francisco. And so there was a geography problem here. You had a head of sales tryna run multiple geography.
Speaker 4: It wasn't even the same time zone. And some companies like dupont had a different problem while they also had geography problems. Dupont made everything from explosives to paint. But you only had one marketing group and one manufacture. How do, how do you manage that? And for about five or six years for corporations, dupont, General Motors, Sears and standard oil, understood. They had a strategy [00:17:30] problem and attacked it by playing with the structure of the company, meaning how the company was organized and they all finally decided that they were going to organize in a radically different form called divisions. Instead of just having functions, they would actually break up like for example, General Motors into the Buick Division and ultimate build division or whatever, or for dupont explosives divisions and the paint division and on top of a thin layer of corporate staff, but now have a company organized by divisions first changed in [00:18:00] 50 years and how companies were organized.
Speaker 4: Fast forward 40 years later, the third form of corporate organization to emerged called Matrix organizations where you start with a functional organization, but now all of a sudden we would have specific projects pop up, gee, I want to work on the new fad six fighter. Well, I have an engineering group, but let me put together a team that could pull out of engineering and pull out a product management and put together for our temporary amount of time and then they'll go back into their functions and then be pulled out again. But that's it. Those are the only three forms [00:18:30] of corporate organization. I'll contend that we're facing a common strategy problem that is not solvable by just pasting on vps of innovation. I believe it's solvable by rethinking on the highest possible level is do we need a fourth form of corporate organization? And I gotta tell you I got the answer, but I'm not going to tell you now. Okay.
Speaker 5: Is this sort of then turning all the operations research that's been done over the past? You know, since World War II, [00:19:00] that was when it seemed to be salient. Is it on its ear now? Is this,
Speaker 4: so if you really think about what we built for the last 150 years is corporations were the epitome of operational efficiency through operations research, the output of business schools. I mean all our stuff has had to be continuous execution, driving to the lowest cost provider and outsourcing and all that stuff. That's great. But you're going out of business and in fact, companies that do that, [00:19:30] I will contend have a much shorter lifespan that companies that now do continuous innovation. That is, if you think about the difference between Amazon and Netflix and apple, when jobs was alive versus standard US companies, the distinction was they were continuously innovating, ruined Leslie, innovating, and it was not some department that was innovating. It's a big idea. It was the entire company was innovating, yet they were making obscene profits. So clearly there are some models of some companies who [00:20:00] have figured out and in fact HP in the 70s and eighties had figured out how to do and then they lost the formula. I think we now actually have a theory, a strategy of how to do that and some really specific tactics. How, I know we could do this in detail for u s corporations and corporations worldwide, but I want to start at the u s and we're going to be talking and writing about that in the next year.
Speaker 5: Great. So that's what you're actively working.
Speaker 4: Oh, actively working. And I'm Hank Chesboro who have inventor of open innovation here at Haas business school and with Alexander Osterwalder [00:20:30] and venture of the business model canvas. All have been part of some of these discussions. You know, I just get smarter by hanging out with much smarter people. And I'm not the only one who's thinking about that. There are lots of very smart people trying to crack the code and at the same time, companies are raising their hand and the symptom of raising their hand is they're appointing vps of innovation and her likes saying, yeah, you know, here's what we are. Oops, it doesn't quite work. And finance has different rules and but wait a minute, I'm trying to be innovative, but the HR manual doesn't allow me to hire people. No, [00:21:00] no. Legal says I can't use our brand here. So what you're really finding is that it's not an org problem.
Speaker 4: It's not anybody's trying to be mean. Is that what we're missing is the CEO and board conversation is, oh my gosh, maybe we need to get innovation in every part of the company, not by exception. That's the idea I'll telegraph for now. And how do you do that without affecting current profits? And it's quite possible because again, there are these experiments of companies that are insanely from a profitable, who've done this. [00:21:30] Now can we just make a teachable and doable by other corporations? And the answer is yes, we're going to go do that. Do you see that pace of technology accelerating? Absolutely. I think we're in the golden age of both technology and entrepreneurship. You ain't seen anything yet. I'm still constantly amazed sitting here smiling. When you say that is why I still love to teach is that, you know, I get to see my students come up with things.
Speaker 4: You hear the 400th hotel automation package or the whatever, but you know, and then you see something, again, drones are three d printing [00:22:00] or you could do white with your phone, you're gonna make a turn on or you're a password through. It's just things that are unimaginable. And then you watch the next generation of Steve Jobs that said, you know, the current version silicon valley is you go on much. Who single handedly is val to obsolete the automobile industry? And at the same time just wrecking havoc in this space launch industry, single individual who had, by the way, zero qualifications to do any of those. Congratulations. Welcome to entrepreneurship. He had the will to be disruptive [00:22:30] and he understood that the technology was about at the edge of being able to do what he did. That's how we got the iPod and the iPhone or else in a perfect world and Nokia would still have 89% market share. If I was General Motors and Ford, I'd be really concerned. Steve Blank, thanks very much for coming on spectrum. Great. Thanks for having me.
Speaker 6: You'd like more insight into Steve Blank's ideas. Go to his website, Steve blank.com [00:23:00] as Steve mentioned, the Lean launch pad course is available. I knew udacity.com to learn more about the NSF mean launchpad curriculum, search for NSF [inaudible] your local to the bay area. Go to [inaudible] dot com if you're interested in startup appreciation materials for educators, go to n c I n aa.org/l l p. Stretching shows [00:23:30] are archived on iTunes yet it gives created a simple link for you. The link is tiny url.com/calex spectrum and now a few some technology events happening locally over the next two weeks. Brad Swift joins me for the calendar.
Speaker 3: California's coastal waters are home to one of the four richest temperate marine biota is in the world. The California Academy of Sciences will be holding [00:24:00] a series of lectures and events to explore this incredible diversity of life. They look, explain what makes this region so productive and why it needs to be protected on Saturday, March 22nd from nine to 11:00 AM a variety of Speakers will consider the impacts of human activity on the local marine ecosystems and the establishment and efficacy of marine protected areas. They will also discuss how diversity is monitored in California's oceans and which areas will need to be most closely scrutinized for future impact. For more information on the [00:24:30] March 22nd event. Please visit cal academy.org
Speaker 5: on Monday, March 31st University of Maryland professor of human development, Nathan Fox will give a lecture on his recent studies on whether experiences shaped the brain and neural circuitry for emerging cognitive and social behaviors over the first years of life. Something that many developmental scientists take for granted. Foxes study the Bucharest early intervention project [00:25:00] is the first randomized trial of a family intervention for children who experienced significant psychosocial neglect early in their lives. A group of infants living in institutions in Romania were recruited and randomized to be taken out of the institution and placed into family foster care homes or to remain in the institution. He then followed up with the children several times over the next eight years and examine the lasting [00:25:30] effects of the deprivation and which, if any interventions were successful in assuaging the harmful effects, the free public talk will be held on March 31st from 12 to 1:30 PM on the UC Berkeley campus in room 31 50 of Tolman hall
Speaker 3: on Wednesday per second. You see Berkeley's department of Environmental Science Policy and management will present a speech by Chris Mooney, a journalist who's written several books on the resistance that many [00:26:00] Americans have to accepting scientific conclusions. His lecture will be titled The Science of why we don't believe in science and we'll examine the reasons behind Americans disinterest in scientific solutions to the world's problems. The free public lecture will be held on Wednesday, April 2nd at 7:00 PM in the International House Auditorium of UC Berkeley. Here at spectrum, we like to present new stories we find particularly interesting. Brad Swift joins me in presenting the news.
Speaker 5: UC Berkeley Professor, Dr. Richard Kramer [00:26:30] and his research team have been able to temporarily restore light sensitivity to mice, missing a majority of their rods and cones in healthy mammals. The eyes detect light with specialized photo receptor cells or rods and cones and then transmit a signal to their optic nerve cells which eventually communicate with the brain. Dr. Kramer and his team explored the effects of a similarly light-sensitive molecule known as d n a Q in healthy mice and mice [00:27:00] with a degenerative disease that caused them to lose nearly all their rods and cones. After dosing, the mice with d n a Q, the mice were exposed to lights and their optic nerve activity was measured via electrode arrays. The diseased mice showed strong light sensitivity. The team next examined a small number of animals in light and dark conditions to test whether the sensitivity conferred any perception of the light. In the diseased mice, [00:27:30] the injected mice were better able to form an association between a light stimuli and electric shock than those in the control group. While millions of humans suffer from similar degenerative retinal conditions, definitive conclusions on the broader therapeutic and deleterious effects of the molecule. D n a Q are still years away.
Speaker 3: In a recent study published in the journal bio materials, UC Berkeley researchers were able to eliminate the transmission rep [00:28:00] of a common infection. Staphylococcus Aureus is a bacterium that commonly infects patients who've had surgeries involving prosthetic joints and artificial heart, bowels, staff, or aces. Ability to adhere to medical advices is key to experience as once introduced to the body. It can cause severe illness. UC Berkeley Bio and mechanical engineering, Professor Mohammad [inaudible] fraud and others in his lab examined how the clusters of staff warriors were able to adhere so well to certain Yana surfaces as well as the type of surfaces [00:28:30] that increased or decreased the bacteria's ability to clean. They quickly found that while staff [inaudible] can adhere to a variety of flattened curves services, it does seem to have a preference for certain structures including a tubular pillar where the bacteria was able to partially embed itself within holes in the structure. Professor, my fraud expressed hope that the improved understanding of these preferences could allow the design of medical devices built to attenuate bacterial adhesion while escaping the need to chemically damaged the bacteria to prevent transmission
Speaker 7: [00:29:00] [inaudible].
Speaker 5: The music heard during the show was written and produced by Alex Simon.
Speaker 1: Thank you for listening to spectrum. If you have comments about the show, please send them to us via email. Our email address is spectrum to a k a l email@example.com Trina's in two weeks at the same time. [inaudible]
Speaker 8: [00:29:30] [inaudible].