Wednesday, May 30, 2012

Lean Government

TLDR: Two things: 1) Uncle Sam (and I) want you to be an entrepreneur inside the US Federal Government as a White House Innovation Fellow. 2) All video from the SXSW Lean Startup track is now available for free.

At SXSW in 2011, I had a really unusual breakfast meeting. First of all, it was at 7am on a Sunday, when almost everyone at SXSW was asleep. Second, it was the day after the first SXSW Lean Startup track, and I was exhausted. Third, one of the people at the meeting worked for the President of the United States. (I was seriously hoping he had not seen any of those t-shirts that had debuted the day before. You know the ones I mean.)

The meeting was arranged by Tim O'Reilly, one of my personal heroes. (Like me, he didn't look so good at that hour of the morning.) We were there to talk to Aneesh Chopra, then the CTO of the United States, and Todd Park, then the CTO of the Department of Health and Human Services (HHS). They wanted to tell me about work they were doing to make the federal government more entrepreneurial. When I left the meeting, I pulled Tim aside and said "are they serious? is this for real?" He said, something like, "watch and see for yourself." 

Fast forward a year later. It's SXSW again, and I have a chance to pay it forward. This time, it's me arranging breakfast. I invited Scott Cook, the founder of Intuit and another one of my heroes, to breakfast. It's uncomfortably early. Aneesh is there again, recently retired from government. Todd is there too, having just been appointed his successor as CTO of the United States. And again, we have an amazing time talking about how the government could radically change how it works, to become more innovative, to work with entrepreneurs from outside and find inside "intrapraneurs" that are already trying to get things done. After the meeting, Scott Cook pulled me aside and asked me, "are they serious? is this for real?" It was my first chance to really reflect on what had happened in the intervening year. I replied, "Scott, we had almost this exact meeting last year. I was extremely skeptical. But, just as Tim O'Reilly predicted, almost every single thing we talked about last year has actually come to pass. These guys made it happen."

Later that day, Todd Park presented a keynote at the SXSW Lean Startup track. He nearly blew the doors off the room. The applause afterwards left me stunned. Almost everyone in the room began the session as skeptics and left cheering. Todd's presentation talked about real-life specific examples of times and places they have put Lean Startup principles into action inside the world's largest bureaucracy.

But you don't have to take my word for it! Because I'm extremely pleased to announce that all of the videos from the 2012 SXSW Lean Startup track are now available, for free, from Udemy. That's 18 full videos of case studies and talks including Scott Cook, Steve Blank, Airbnb, Etsy, and much more. To give you a taste, here is the complete talk (including slides and video) by Todd Park:

(If the embedded player doesn't work for you, here are links to Todd's slides and the newly released video.  You can sign-up here to see the rest of the SXSW videos on Udemy.)

One of the things that impressed me the most at that initial meeting, was a program that Todd and Aneesh pioneered at HHS called "Entrepreneurs-in-Residence." This program paired entrepreneurs from the private sector with intrapreneurs from inside HHS to small high-impact startup teams with a big vision but a time-limited mandate (often six months or less). And that's not six months to write up a cool business plan. That's six months to build an MVP, test, iterate, and launch a real product. This program is where many of the success stories that Todd shared on stage came from, including  the Centers for Medicare & Medicaid Services and the FDA. His stories and specific examples of "lean government" in action left the audience with a simple message: if they can do Lean Startup in government, what's my excuse?

One of the wild-eyed ideas that came up at breakfast was Todd's vision that he could roll out the this entrepreneurial model across the entire federal government. He enlisted me as an enthusiastic supporter, and I've been working with his team since then to try and help them make it a reality. And that's exactly what's about to happen. It's called the White House Innovation Fellows, and the program is now open for applications. That means you!

For a lot more information on the program, you can see this incredibly in-depth blog post over at O'Reilly Radar.

I think this is an amazing opportunities for entrepreneurs to serve their country by using their uniquely valuable skills. We're at the beginning of a once-in-a-generation opportunity to change the way huge organizations work, by cultivating the practice of entrepreneurial management. If you want to be part of making that future, I hope you'll consider applying for the program.

Wednesday, May 9, 2012

A new field guide for entrepreneurs of all stripes

TLDR: Brant Cooper and Patrick Vlaskovits, authors of The Entrepreneur's Guide to Customer Development are back with a new book called The Lean Entrepreneur. Illustrations by FAKEGRIMLOCK. You can pre-order it starting today.

Teaser for the surprise announcement later in the post....

It's been just about two years since Brant Cooper and Patrick Vlaskovits released their self-published book The Entrepreneur's Guide to Customer Development (you can see my original review here). It took the idea of Customer Development and made it accessible to a whole new audience. Since then, Brant and Patrick have been tireless advocates for the whole Lean Startup movement. From Lean Startup Machine, Lean LA and San Diego Tech Founders, to countless speeches and workshops, I have seen the impact that their leadership has had first hand.

There continues to be an incredible demand out there for actionable, practical lessons in how to apply this emerging set of ideas.

Today I am excited to be able to share that Brant and Patrick have taken a big step in meeting that need. They are launching their next book, a true field guide for entrepreneurs, called The Lean Entrepreneur: How to Create Products, Innovate with New Ventures, and Disrupt Markets. It will be published by Wiley this fall. And you can pre-order it starting today.

Brant and Patrick have set out to write and design a book that not only describes practical steps for implementing Lean Startup principles in your innovative endeavors – but to inspire your creativity as well by sharing diverse examples of what works, and more importantly, what often doesn’t work.

Their goal is to share stories of Lean Startup applied in many industries and domains outside of tech startups. While I got my start as a technology entrepreneur, I have always felt that industries such as traditional book publishing or Fortune 500 retailing will reap huge competitive advantages by adopting Lean Startup approaches.

Brant and Patrick strongly believe, like I do, that these principles will serve innovators of all types, whatever their industry. Wherever innovators and entrepreneurs face extreme uncertainty --  be it in social entrepreneurship or developing a new musical artist or a machine-vision startup -- a principles-based approach can help.

To that end, they've refined their thinking and have incorporated feedback about The Entrepreneur’s Guide to Customer Development into The Lean Entrepreneur. They’ve also augmented their writing with research and interviews, collecting the stories of dozens of entrepreneurs who are now applying Lean Startup thinking to all sorts of ventures, ranging from music and artist development: Legendary music producer Marti Frederiksen (Aerosmith, Def Leppard, Fuel, Mötley Crüe, Ozzy Osbourne), to finance and investment: Dave McClure of 500 Startups to apparel and ecommerce: Chris Lindland, Founder of BetaBrand to automotive manufacturing: Danny Kim, Founder of Litmotors, and of course, technology startups such as Lucas Carlson of AppFog, Hiten Shah of KISSmetrics, Nathan Oostendorp of Ingenuitas and many others.

These interviews, nuggets, hacks, insights and case studies have been abstracted into actionable tactics for entrepreneurs of all stripes.

The book is still in production, so I haven't seen the whole thing yet. But I've been impressed with what I've seen so far. To whet your appetite, I asked Brant and Patrick for permission to share a few excerpts from the draft manuscript. They are below, followed by one last surprise announcement.

In this excerpt from The Lean Entrepreneur, by using fishing as an analogy, Brant and Patrick reveal how market segmentation influences your business model and why “For Whom” is as important as “What” to build.
Market segments drive your business model. The process of segmenting your market is one of the poorest understood concepts in the business startup world, yet is one of the most powerful. The market segment you pursue is inextricably linked to the other aspects of your business model. 

Segments determine how future customers will expect to interact with the product, how they will be marketed to, and their method of purchasing. Differences in how people are reached, their expectations of the buying process, how their trust is earned, the price point they’ll accept, what distribution methods are most efficient, the messaging that attracts them -- all these factors (and more) may represent different sub-segments. 

A good way to think about market segment is by thinking about fishing. 

In the kelp beds off the coast of Southern California, one can find thousands of species of fish, but two of the most sought after by commercial fishermen are the California Halibut and the White Seabass. Both fish are classified as “demersal”, meaning they live near or on the bottom of the ocean floor and catching fish of both species in the 20-30 lb pound range is not uncommon.

Halbut are flatfish. They make themselves effectively invisible by nestling into the sandy bottoms between patches of eel grass and when sardines swim by, they explode out of the sand to nab them. They have two eyes on one side of their body, which make them very adept at ambushing predators. Fishermen know that one of best baits for catching halibut is a fellow denizen of sandy bottoms, the lizardfish. 

White seabass are long and cylindrical, and have a much more typical “fish” form. They cruise the kelp beds looking for squid or mackerel to eat. White seabass are very difficult to hunt with spear guns as they are very sensitive to noise, and the slightest inorganic noise will set them off. 

Any amateur fisherman can throw a line off the end of the local pier baited with frozen squid and pull in a few mackerel, or maybe even a rockfish.

But commercial fishermen have to -- day in, day out -- in good weather or in bad -- acquire their target fish and then sell it for more than cost of catching it. To do that repeatedly and scalably, they have to develop a deep understanding of the ethology of the fish. They must learn what sort of bait to use with what tackle, the best time of day and what environment will maximize the potential to catch the particular fish they are looking for. Fish can only be caught when they are accessible -- it doesn’t help you to know that there are fish 1,000 feet below your boat, if your line cannot get down to depth.

What are the value propositions, benefits and the messaging (bait), the pricing structure and channels (tackle), and length of sales cycle (how likely a fish will snap your line)? Will you need a big net (full-page ads in the WSJ) to catch lots of small sardines? Or will you need to staff and finance a whaling ship to be out at sea for months at a time to catch two or three whales (enterprise sales model)? Or perhaps you need to chum (freemium) the waters a bit? Maybe you’ll be hunting on a reef with a spear gun for 20lb groupers (B2B sales at a conference)?

You can build a mobile app for senior citizens, launch a Facebook campaign targeting Fortune 100 CEOs, or charge $25 for a food cart hamburger if you’d like, but the mismatch between product, tactic, pricing and segment might delay that Hawaiian vacation you’ve been planning.

It may seem rather obvious, but as with many aspects of entrepreneurship, the practice of segmenting your market seems commonsensical, but is more complicated than it seems to put into practice. And the problem is that few take the time to really master it.

Entrepreneurs carry market segments around in the back of their minds, relying on gut-feel to determine whether customers they are seeing are the “right” customers. The problem is when you’re chasing revenue; any and all customers will seem like the right customer.
In another excerpt from The Lean Entrepreneur, Brant and Patrick describe BetaBrand’s fast, iterative, and MVP-driven approach to manufacturing and selling apparel.
Traditionally, the clothing industry is seasonal. Two to four times a year, large clothing companies release products to the world and eventually the make their way online, but it's an old-fashioned industry that moves at old-fashioned speed compared to the ways people interact with companies on the Internet.

But that's not what founder Chris Lindland had in mind for BetaBrand, an online clothing company. Not an online clothing catalog, mind you, but a clothing company. Chris explains:

“What I figured is that an online clothing company has to abide by the rules of blogging or Twitter, which people expect when interacting with companies online. The idea with BetaBrand is we're going to try to put up products as rapidly as we can.

In order to save on our costs we decided to make those batches very small and as a result of making small batches you can iterate on them if anything is successful. It was a fairly organic thing. It was really done to control our costs to begin with, but it's become a fascinating way to actually improve upon products as we go along."

Like Continuous Deployment, whereby IMVU deployed changes to their web application +50 times per day, BetaBrand's aim is to put out a new product every day. They manufacture only a small batch of a particular product, but enough to come to a decision point:

“If there's anything that we've learned from our customers, it's that with the first hundred to two hundred pair sold, we can make minor changes on it to improve it and retest, we can turn it into an entire line, or we can kill it.”

Reprinted from The Lean Entrepreneur by Brant Cooper and Patrick Vlaskovits. Copyright © 2012 by John Wiley & Sons, Inc. Reprinted by permission of John Wiley & Sons, Inc.

And, these days, no book launch announcement would be complete without a funny book trailer to go with it. Want to know what "Christopher Walken" thinks about The Lean Entrepreneur?

Lastly and perhaps most importantly, Brant and Patrick tell me that The Lean Entrepreneur will be heavily visual, filled with full-color illustrations of the concepts they're explaining. To that end, they've teamed up with the most unique startup artist there favorite robot dinosaur, FAKEGRIMLOCK.

If that doesn't convince you pre-order, you're probably beyond help. But just in case you are right on the fence, and want one more reason to do it, you should know that Brant and Patrick are partnering with LA-based crowdfunding startup, to let early adopters of their book become part of co-creating it. If you pre-order The Lean Entrepreneur  from them, they'll list your name as a co-creator in the book and share material with you as they write.

The Lean Entrepreneur will be published by Wiley this Fall. You can order it on Amazon. But I suggest you pre-order it at