Tuesday, September 17, 2013

Applying Lean Startup Beyond Silicon Valley

Guest post by Lisa Regan, writer for The Lean Startup Conference

Entrepreneurs beyond Silicon Valley, including those working abroad, often have to retool Lean Startup methods to apply them in places with very different business cultures. On September 24 in the U.S. (September 25 in Asia), international Lean Startup experts Kevin Dewalt, Takashi Tsutsumi and Justin Wilcox will meet for a webcast to compare notes and hash out solutions. This event is free, and their conversation will be followed by a live Q&A for webcast attendees; register today to join them.

To introduce you to some themes of this webcast, we spoke to Kevin, Takashi and Justin last week about the biggest challenges they see in implementing Lean Startup methods outside the U.S. Here’s what they had to say.

Kevin Dewalt—a speaker at this year's Lean Startup Conference—is an entrepreneur, investor and adviser who has served as an investor for a strategic U.S. government fund and as Entrepreneur-In-Residence for the National Science Foundation. Two years ago, he moved to Beijing, where he founded Lean Startup Meetup Beijing, as well as his current venture, SoHelpful.me, a platform for leveraging one-to-one relationships to build reputation and word of mouth.

“Two years ago I moved to Beijing, where, as the founder of SoHelpful.me, I take calls from all over the world, talking entrepreneurship and innovation with people in 30-minute intervals. Those conversations can often circle around the difficulties of entrepreneurship outside Silicon Valley. I think one challenge in trying to take Lean Startup ideas outside Silicon Valley, and especially to places that are highly culturally different from the U.S., like Asia, is that the methods most of us are familiar with are actually pretty culturally specific. If you ask people in Asia about Lean Startup methods, they’ll often say, ‘I’m not sure that would work here,’ and in a sense they’re right–many of the familiar methods won’t work if applied unmodified. That’s why I recommend that people focus on ideas rather than tactics. Lean Startup ideas will work even in places as different from Silicon Valley as Asia–the specific tactics will need modifying, though.

“Think, for example, about the way we talk about sales and customer development and the idea of ‘getting out of the building.’ In Silicon Valley, you can go to people and ask them what their problems are, and what solutions they would value, and they’ll be happy to answer you. People in Silicon Valley are accustomed to openly discussing change, and to talking about what’s wrong or needs fixin —it’s culturally accepted there and you get a lot of practice at it. In most of the world, that’s just not the case. If you walk into a manager’s office almost anywhere in Asia and say, ‘I want to talk to you about your problems,’ he’ll tell you that everything’s fine, that he has no problems. He’ll probably suspect that his boss sent you. Right away, by talking in terms of problems and change, you’ve lost that person; they’ll just shut down.

“This is not to say that you can’t get out of the building in Asia, too. But you’ll have to go about it differently. Relationships are very important, and introductions are valued, even expected. You’ll need to do the legwork to get introduced, and to become known to people before you ask them for help or information.

“Another resistance or challenge faced by people starting businesses in Asia comes from within the startup itself, around getting support from co-founders and investors. There’s often a practice in Asia of locking onto the first idea as ‘the idea.’ Impatient investors and team members give little support to a founder trying to do Customer Development to verify or modify that idea. They often look on this as a waste of time. And then, when customers are not buying the product, the blame will tend to focus inward — on the founder for perceived shortcomings in the product, rather than examining the question of whether the product itself is actually solving a problem.

“What can you do in the face of such challenges? As I mentioned above, think ideas. When you find yourself getting overwhelmed with tactics, remember that the big idea of Lean Startup is search – it’s about searching for opportunity. People search differently in different cultures. To find out how they search, you need local advisers, people who understand how to apply Lean Startup methods where you are, and to do customer development in ways that are relevant to that culture.

“The good news is that those people make themselves known. The Lean Startup community is very tight and well-organized. There are Facebook pages, and Meetups, both of which are good filters for smart, passionate people around the globe. (I’ve observed that people don’t organize Lean Startup Meetups unless they’re serious.) Those organizers will in turn value the Silicon Valley perspective that you bring – you just want to make sure you let them know that you’d like them to show you how they do it where you are now.” 

Many of the challenges Kevin describe resonate with Takashi Tsutsumi. Takashi has been a venture capitalist for fourteen years, investing in technology startups both in Japan and in the United States. Enthusiastic about the scientific approach for a startup, he personally translated both The Four Steps to The Epiphany and The Startup Owner's Manual into Japanese. On weekends, he evangelizes Customer Development and runs a Lean LaunchPad class nationwide in Japan. Takashi spoke to us specifically about what it’s like to try to bring Lean Startup methodologies to a business culture as conservative as Japan’s. He described two challenges, and two pieces of good news. [Ed note: Takashi emphasized to us that his ideas here are his own and not affiliated with any companies that he works for or is involved with.]

“Japan is known for its conservatism and the norm of lifetime employment, both of which result in a lack of entrepreneurship. In this environment, I have been practicing and evangelizing Customer Development/Lean Startup for the last seven years (with great help from my teachers Steve Blank and Bob Dorf and my friend Masato Iino), facing challenges and delighted by the unexpected good effects for entrepreneurship. The following are a few examples.

“Challenge #1:  Perfectionism and detail-oriented culture

“Japanese are known for their perfectionism and the Japanese culture is highly detail-oriented. This culture particularly contradicts with minimum viable products. Entrepreneurs worry that they will lose their trust and reputation with customers if their products compromise features, UI/UX, quality, etc. In addition, although entrepreneurs come up with good MVPs, they gradually add more features as customers say that A, B, and Z are missing, resulting in a ‘maximum’ viable product instead. Therefore, one of the keys for success to practicing Lean Startup methodology in Japan is to encourage entrepreneurs to be patient in minimizing their products. I sometimes refer the nice rule of thumb from Eric Ries, ‘Take what you think is right now and cut it in half and do that two more times and ship it back.’

“Challenge #2:  Pivot is failure?

“Pivoting is a key Lean Startup concept, but in Japan, pivot mostly means failure. The Japanese perfectionism affects this thinking in that people consider it right to complete a plan once it’s developed. First, this is true for entrepreneurs. They stick to the initial idea (i.e., the hypothesis) even if facts tell them it’s wrong. They just hate to admit being wrong, or they believe themselves too much to change their mind. Second, and more important, stakeholders, such as investors and management, think this, too. Even when entrepreneurs get used to the principle of Lean Startup, in which a pivot is not necessarily a failure but is progress, their stakeholders don’t share the sensibility. Investors and management use an original (therefore unproven) plan as a yardstick, so I often hear funny conversations that effectively go like this:

VP Sales: I talked to many customers to see whether they have the problem we hypothesized and whether our solution properly fixed their problem—but none of them said yes. We should pivot.

CEO: I know, but we can’t pivot as I got approval from the board by committing to our business plan. We have to stick to our original plan untapped and carry on, even if we know we are wrong.
“I see this as the largest challenge for Lean Startup practitioners, especially in Japan. Therefore, ‘Step Zero of the Four Steps,’ or buy-in, is more important in Japan than in the Valley.

“Good news #1: Perfectionism and detail-oriented culture

“Perfectionism and detail orientation inhibit adapting Lean Startup methodology in Japan, but they turn out to be strengths once people buy in. Once they buy in, entrepreneurs in Japan follow and execute Lean Startup exhaustively.

“I see exhaustive execution of Lean Startup methodology often in the mobile/internet space. One good example is Cookpad, Japan’s top recipe site. Cookpad develops new services and features on a strict Lean Startup method. They test selling an MVP first to their colleagues, and they have to pivot if their colleagues do not pay for it. In fact, Eric Ries’s Lean Startup is mandatory reading for new hires prior to their first day. Cookpad also has their homegrown tools for hypothesis building and cohort analysis for effective execution of Lean Startup methodology. Yes, as Lean Manufacturing was the heart of 20th century Japanese manufacturing, Lean Startup’s process-oriented quality nicely fits the Japanese mind. I hope more startups and corporations in Japan execute the Lean Startup methodology in the Japanese ‘relentless’ manner.

“Good news #2: Customer Discovery nurtures entrepreneurship

“Customer Discovery is never easy in Japan. Ordinary people do not talk to strangers, knowing they hate unsolicited inquiry. However, the more customers an entrepreneur talks to, the more they learn. What surprises me, however, is that talking to customers also turns non-entrepreneurs to entrepreneurs because they feel a sense of fun and confidence in their idea. As many of you saw in our final presentation for the 2020 Olympic game city, Japanese inherently love ‘O-MO-TE-NA-SHI,’ meaning total empathy. Here’s an instance. A group of graduate students at Tokyo Institute of Technology whose goal was to be researchers, found that prospects loved their product during a Lean Launchpad class. They decided to pursue their startup idea. Three out of seven teams in this Lean Launchpad class in Osaka decided to found a company to pursue the business idea they had tested by talking to a bunch of customers. This may be an effect from the perfectionism in Japan, in that that they execute exhaustively once they believe and feel confident after Customer Discovery. I find this phenomenon an unexpected effect of Lean Startup methodology, but very interesting, particularly given that Japan must increase entrepreneurship and new startups for the revitalization of its economy.”

Finally, we talked to Justin Wilcox, another Lean Startup Conference speaker this year. Justin has started several companies that have not succeeded. This process has led him to investigate the science of entrepreneurship, a topic he spoke about at last year’s Lean Startup Conference in a talk on crowdfunding MVPs. He leads Lean Startup workshops around the world, recently spending a lot of time in Singapore and Puerto Rico. He is a mentor for both Founder’s Institute and Startup Weekend and he blogs about Lean Startup matters at CustomerDevLabs.com. He spoke about a carrot-and-stick approach to encouraging Lean Startup methods in areas where they may run up against entrenched practices.

“My experience outside the mainland U.S. has largely been in Puerto Rico and Singapore, where I've noticed some real differences from Silicon Valley—some that are challenges, some advantageous. One major challenge in smaller countries is that an acute sense of market size has a negative influence on people's sense of how to talk to customers. Founders in these smaller countries sometimes think of their home country as their market, when their opportunity could be much larger. And so when we tell people that they have to get out of the building and interview X number of people in a large market (U.S., Europe, etc.), it’s naturally daunting. It’s uncomfortable enough interviewing customers—complicate that with different accents, time zones and cultural references and ‘getting out of the building’ gets harder.

“Market size plays into a broader under-confidence outside the U.S.—or perhaps it’s actually an over-confidence inside the U.S. In Singapore, for example, the first question I'm often asked is, ‘So what do you think of Singapore?’ And of course I say that it's great, it's extraordinary — because it is. But I notice that in the U.S we don't ask foreigners what they think of our country because there's a basic assumption that the U.S. is amazing. Puerto Rico and Singapore were both colonized, and I sense their histories of ceding power to some force outside and greater than themselves (foreign governments, large corporations, etc.) is reflected in their entrepreneurial culture. In that context, several Lean Startup leaders in these communities have to empower founders to take risks and embrace failure in front of friends and family—harrowing work at best, inconceivable at worst.

“My approach to confronting these issues outside Silicon Valley —really, outside the U.S.—is similar to the way I teach Lean Startup in general, which is to accept that everything about the methodology is hard, because people have to be willing and able to overcome their own basic psychological defenses. I try to encourage people to think about what they want out of life, and the ways this set of practices can help them get there, instead of only focusing on the barriers. If I can connect with an entrepreneur about what they want to accomplish, and what they are passionate about, I have an easier time persuading them to get outside themselves and beyond their usual limits and defenses.

“Of course this is difficult abroad—it is anywhere. And in my experience, people in Silicon Valley don't have it figured out any better than people elsewhere. This gets to the advantage that people outside the U.S. can have in implementing Lean Startup. I've been struck by instances where I've been to other countries and spoken with people who really get Lean Startup, and who are shocked that all people in the Valley aren't already doing these things. In fact, the culture of Silicon Valley, flush with success, can create its own kind of complacency, as though simply being in the right place at the right time will be enough. People working in environments that are not flooded with success will use anything they can find that will step up their game. So while the broader culture may resist entrepreneurship, individual entrepreneurs abroad can be open to trying anything, because they have to be. For instance—I would put more money on JFDI in Singapore, based on the way I see them pushing themselves, than almost any incubator in the U.S.”

Join Kevin, Takashi and Justin on September 24 (September 25 in Asia) for a free webcast to discuss these and many other issues around implementing Lean Startup ideas beyond Silicon Valley. Don’t forget to register to attend, and then prepare your questions for the live Q&A to follow the discussion!

PS. For The Lean Startup Conference, we sell tickets in blocks. When one block sells out, the price goes up. We have just a few tickets left in the current discounted block. Register today for the best prices. 
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