Why the Lean Startup Changes Everything – even for Business Schools and Social Enterprises

Presented byK K Tse

Founder and Chief Education OfficerEducation for Good CIC Ltd.

at theBaptist University

School of Business Postgraduate Programs Welcome Banquet cum Conferment of Honorary Professorship

September 18, 2014

An intriguing article in Harvard Business Review

May, 2013

“Why the Lean Startup Changes Everything?”

By Steve Blank Stanford University

Free download: http://steveblank.com/2013/05/06/free-reprints-of-why-the-lean-startup-changes-everything/

You might ask…

What is the ‘everything’ being changed?

Why does it matter that ‘everything is changed’?

How is it possible that the Lean Startup could change everything?

What is Lean Startup anyway?

What is the ‘everything’ being changed?

Startups of various sorts. New

product/service/enterprise development in any organization large or small, for-profits, non-profits, social enterprises, public sector organizations, etc.

Why does it matter that ‘everything is changed’?

“The Lean Startup could do more to boost global economic growth than any management books written in years.”

Tom Eisenmann, Harvard Business School

“The ideas in The Lean Startup will help create the next industrial revolution.”

Steve Blank, Stanford University

How is it possible that Lean Startup could change everything?

It is a new methodology that could be taught and mastered so that ordinary people would have a much greater chance in successful startup.

Insights from Patrick

Cheung’s 黑暗中對話

What is Lean Startup anyway? The global Lean Startup

movement is about three years old.

It started with the publication of the book Lean Startup by Eric Ries in 2011.

A book with a

mission:

To improve

the chances

of success for

startups worldwide

Who is Eric Ries?

Eric Ries

Entrepreneur-turned writer and consultant

Co-founder and CTO of IMVU Blogger of the widely read

Startup Lessons Learned Thought leader of the global Lean

Startup movement Entrepreneur-in-residence at Harvard

Business School

Eric’s definition of ‘startup’

A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.

Two other influential books

The Startup Owners Manual by Steve Blank and Bob Dorf, 2012

Running Lean by Ash Maurya, 2012

Two Lean Startup examples

Zappos is the world’s largest online shoe store.

When it first started, founder Nick Swinmurn envisioned a new and superior retail experience for customers buying shoes.

The Zappos startup approach

He DID NOT start with state-of-the-art website, payment and delivery systems, warehouses, logistics support, distribution partners, etc.

Instead, he started by running an experiment to test the hypothesis that customers were ready and willing to buy shoes online.

He asked local shoe stores to allow him to take pictures of their inventory and undertook to buy the shoes at full price if a customer brought them online.

Only when this had proven the demand did he go on to build the other parts of the business model.

Dialogue in the Dark HK

Dialogue in the Dark is a social franchise headquartered in Germany

It had taken root in 22 cities before coming to Hong Kong

The core products are centered around dialogue experience in the dark, including an Experiential Exhibition which costs millions of dollars to build

A lean startup approach

Founders K K Tse and Patrick Cheung each put in HK$50,000 to organize a series of fee-charging ‘Dialogue in the Dark’ Executive Workshops

It generated close to HK$1 million of revenue in the first 12 months before raising HK$5.6 million of capital from 20 shareholders to rent a 10,000 sq.ft space and spent close to HK$4 million to build the Exhibition Hall

IDEAS

Build

Measure

Learn

PRODUCT

DATA

MVP

Test assumptions

Innovation accounting

Validated learning

Lean startup approach in a nutshell

Leap-of-faith assumptions

10 crucial ideas underlying

the lean startup approach

1. Design a Business Model, not just products

The 9-block Business Model

Your ‘solution’ is not your product.

Your Business Model is your product.

Solution

2. Use a Lean Canvas, not business plan

3. Create validated learning, not after-the-fact learning

Validated Learning

有的學習 Vs 無的學習

4. Systematically test assumptions, before they become too costly

All business models contain multiple assumptions, many of them will be proved to be invalid.

5. Get out of the building, there are no facts inside.

不要 < 閉門造車 >

6. Create ‘Minimum Viable Product’ (MVP) < 最低成本可行產品 >

By far the most important concept to master.

7. Launch early and fail fast

“If you’re not embarrassed by the first version of the product you’ve launched,

you’ve launched too late.” Randall Stross,

The Launch Pad

8. Use innovation accounting, don’t focus on money

“Count what counts.”

9. Persevere or Pivot

堅持 抑或 轉策

10. Build a lean startup team, not just any team

The whole team must master the lean startup methodology

IDEAS

Build

Measure

Learn

PRODUCT

DATA

MVP

Test assumptions

Innovation accounting

Validated learning

Minimize TOTAL time through the

loop

Leap-of-faith assumptions

The bottom line for using lean startup approach

From failure rate of 80-90%

to success rate of 60-70%

What are the implications for Social Enterprises and Business Schools?

For Social Enterprises, it is a

Godsend!

Success rate will be greatly improved.

Lean for social good: a brand new website Lean Impact

LEAN IMPACT is turning Lean Startup into a road map for social good organizations.

What about Business Schools?

Business Schools traditionally teach things relevant to ‘Business as Usual’.

But nowadays ‘Business as Usual’ is no longer an option.

“It's time to turn capitalism upside down - to shift our values from an exclusive focus on profit to also caring for people, communities and the planet.”

The way forward….

From Business

School to Social Business

School

My prediction

Within the next ten years, there will be more and more Business Schools in different parts of the world transforming themselves into Social Business Schools.

Social Business Schools

Educating students to create social businesses which are

profit-making and solving social and environmental problems at the same time.

Dual challenges for Business Schools Enable the students to

master the lean startup methodology

Inspire the students to create social businesses that change the world for the better

Social Business is fundamentally different from Corporate Social Responsibility (CSR)

Typically, CSR budget is less than 0.01% of corporate turnover

A social business is 100% turnover directed at solving social or environmental problems

A good example is B Corporation – a US-based movement to inspire and support mainstream business to become social business

Are social business and social enterprise the same?

Yes and No

They are the SAME

Both attempt to solve social and environmental problems

They are DIFFERENT in profit distribution practiceSocial enterprise: 0% to 35%

of profit allowed to be distributed to shareholders

Social business: no limits, could be 100%, such as most B Corps

Summing up…

A Social Business School inspires,

educates, and supports its students and

graduates to create social business and social enterprise

Will the Baptist University

School of Business be the first Social

Business School in Hong Kong and Asia?

Thank you.